The Effects of Human capital Capital And and R&Desearch and Development in TFP Growth: The Case of Iran

In this study, we examine factors influencing the Total Factor Productivity (TFP) in the Iranian economy. These factors are: the percentage of higher education employees as proxy for human capital, the government research and development capital stock and the ratio of actual output to potential output as the index of capacity utilization. We estimate TFP usingTFP using the ARDL (Auto-Regressive Distributed Lag) method covering data over the periodthe period 1968-2004. The results indicate that in the long run, the percentage of higher education employees, the government research and development capital stock and the capacity utilization have had positive and significantlsignificant effects on productivity. In this period, in spite of increasing trend in human capital and the government R&D capital stock, TFP accounts for only five percent of the long run economic growth. The reasons for this meager share of TFP growth aregrowth is reduced the degree of competitiveness, misallocation and inefficient use of resources in the economy.