Effects of Human Capital on Total Factor Productivity in Iran

For many economic planners and policy makers, enhancing productivity has been one of the efficient methods in increasing economic growth. Based on that, countries have invested a great deal to increase total factor productivity. In this article, the effect of human capital, openness to trade and inflation on total factor productivity has been investigated in Iran during 1976-2012. We estimated total factor productivity TFP, using Malmquist index. We also investigated the effects of various factors on productivity, using Johansen and Juselius’ co-integration techniques. Our findings indicate that human capital has a positive effect on productivity. We also found that openness has a positive and inflation has a negative effect on total factor productivity in Iran.