Study on the Relationship between Investment on Human Resource and Physical Capital with Economic Growth in Iran (1971-2005)

Introduction: Most of the economists emphasis on the formation of physical capital and human sources as the main determining factor of economic growth and development. In new financial theories, more emphasis is given on the human capital. Training manpower and his qualified are the pivot of growth and expansion of technologies. In fact, physical capital can only be increased when the country has sufficient quantity of human resources.
Materials and Methods: According to the close relation between investment in manpower and physical capital with economic growth, this paper attempts to analyses the relation between these variables during 1971 to 2005 with the help of Granger causality test and VECM.
Results: On the basis of Granger causality standard, physical capital and financial position are related to the contact between human resources and economic growth. The result of the Granger causality test VECM shows that both in short and long term study, economic growth and human resources are connected. According to Granger causality relation, physical investment and human capital are related too.
Conclusion: Therefore, training of manpower can increase the supply of skilled, researcher and entrepreneur labor force. Certainly these trained labor force can pave the way for further economic growth of the country by innovation and better utilization of available resources.

JEL Classifications: C32, O53