The Role of Natural Capital in Economic Growth of Iran

Natural capital has been introduced in growth models recently in order to address the growth differences among the countries. In this context, the objective of this study is to examine the role of introduced indices for natural capital in Iranian economic growth. To get the objective, Solow neoclassical growth model using the data for 1980-2015 was applied. The applied indices include ecological footprint, biological capacity, ecological footprint-capacity difference, ecological tension, and agricultural land. The findings showed a significant fluctuation of the natural capital indices contribution to growth. Production elasticity with respect to ecological footprint found to be in the rage of 0.02-0.04 while the corresponding values for biological capacity and agricultural land tends to increase, ranging from 0.10 to 0.15. The corresponding values for physical capital fall into the range 0.12-0.17. In addition, the appropriateness of CES production function revealed the validity of constant returns to scale assumption in Iranian economy.