The effect of inequality on growth of the human capital channel: Case Study for Iran

Human capital is one of the important factors, affecting the relationship between inequality and economic growth. Depending on the accumulation of human capital in the country, the impact of inequality on economic growth will be different. Failure to this channel in theoretical and experimental studies, makes identification error and will lead to misleading results that haven't been considered in the studies by Iranian researchers. In this study we will be examined the impact of inequality on growth in Iran under different levels of human capital, using time series data for the years 1969 to 2014. Data modeling is based on threshold regression that compare to other estimation methods, providing more consistent estimates. The results of the model indicate that in Iran, the impact of income inequality on economic growth has been negative, but the negative effect of inequality on economic growth decreased in line with the maturity of the economy and increase the level of human capital. Also the combined effect of physical capital and human capital on economic growth increased along with levels of human capital and the maturity of economy.