The Effect of Human Capital on Economic Growth in Iran; GMM in Time Series Approach and Fuzzy Logic

The quality of human force is one of the effective factors on economic growth. Classical time series methods do not have the ability to estimate models that have moments conditions. Since economic growth is influenced by past values, we need a dynamic model and it should be estimated by dynamic econometric method. This study by GMM method in time series evaluate the effect of human capital on economic growth during 1981-2019.Human capital is a latent variable in economics and often is replaced by alternative proxies. Based on theoretical foundations, it is argued that the human capital index in addition to the education aspect is influenced by other aspects such as; skill and health. Therefore, in this study, by using fuzzy logic, an indicator for human capital in the Iranian economy has been made that considers three main aspects (education, skills and health) of human capital. The results of index estimation showed that the organizing of human capital has grown significantly. The results of estimating the economic growth model using the fuzzy human capital index showed that promoting the level of human capital increases economic growth. Other results indicate the positive effect of the variables such as; governmental expenditures, industrialization, physical capital and economic growth of the previous period on Iran's economic growth. Also, trade freedom and urbanization negatively impact on Iran's economic growth.