Investigation of effect of Investment on Higher Education on Economic Growth of Iran during 1971-2005

In this paper endogenous models have been used to quantify the relation between the variables influencing on economic growth. The designed model is estimated by using Johansson five steps approach. On the base of endogenous model, Iran's economics growth has been introduced as an endogenous variable which is a function of investment in human capital, physical investment and foreign debt. Islamic revolution and imposed war on Iran have also been introduced as dummy variables.On the bases of this model one co integrated vector has been obtained which indicates that in the long run impact of increase in human capital accumulation and increase in physical capital accumulation on economic growth of Iran is positive and significant while the effect of increase in foreign debt is negative and significant. In addition this vector shows that in the long run human capital has had the most effect on the economic growth of the country.In order to attain a high rate of economic growth, expansion of investment in human and physical capital seems necessary. Moreover it is advised to rely on domestic saving instead of attraction of foreign capital and debt.