Accumulation of Tangible and Non-tangible Capital in Iran: Emphasizing on Resource Rents

Natural resources generate the major part of national wealth in resource-rich developing countries. Based on economic theories, if natural resource rents are reinvested continuously in other forms of capital, such countries can benefit from these resources. Thus, examining the mechanism of how to rents affect economic growth through capital accumulation channels is of great importance. Because of the importance of management of resource rents in achieving sustainable growth and development in resource-rich countries, this paper investigates the impacts of resource rents on accumulation of four kinds of capital (foreign, physical, human and social capital) in Iran during 1970-2014. To this end, a simultaneous equations system consisting of various capital forms is designed, and estimated by using Seemingly Unrelated Regression estimator. According to the findings, resource rents have positive effects on accumulation of foreign, human and social capital in Iran. But it is of negative effect on accumulation of physical capital. The results show that physical capital is affected by natural resource rents more than other kinds of capital. This is because of unproductive government investments in physical capital, hence not only resource rents increase physical capital but also they affect physical capital negatively.