A Strategic Analysis on the Effect of Human Capital on Labour Productivity Growth

The purpose of this paper is to investigate the effect of human capital on labour productivity growth in Iran during the past three decades. We argue that in order to promote human capital in Iran, it is necessary to account policy making as one of major strategies for productivity growth, and consequently, economic growth. A close examination of labour force performance during the implementation of Development Plans, exhibits a slow growth of labour productivity. Results of ARDL estimation recognized the following as main factors explaining labour productivity growth in Iran: foreign R&D accumulation, human capital, physical capital accumulation, and investment in ICT. Also, domestic R&D accumulation and average education years have a negative effect on labour productivity growth.