Impacts of Higher Education on Iran's Manufacturing Export Supply (1966 - 1999)

Human capital and its role in the progress of production have been in the core of attention of the economic literature. Additionally, human capital not only increases the number of skilled and trained laborers, which can lead to a higher rate of productivity, but also provides greater opportunities of economic growth and development.The present paper thus evaluates the effect of promoting higher education on Iran’s manufacturing export supply.To this end, a simultaneous equation system including both endogenous and exogenous variables, particularly higher education as an exogenous variable, is specified in order to make a systematic and theory-based relationship between such variables. Each equation of the model is then estimated by applying the weighted two stage least squares (W2SLS) method over the period 1966 – 1999, to examine the impact of higher education promotion on Iran’s non-oil exports.Overall, estimation results obtained look reliable, so that they represent statistically expected significance of equation coefficients available in the system. According to the results obtained, a scenario of 20 percent increase in the value of higher education variable (normally in the form of the ratio of all higher educated employees to the total employees in the manufacturing sector) is conducted, and then the relevant model is simulated by the analytic Newton Method. The results reveal an increase of about 16 percent per annum on average in manufacturing exports. The implication is that the conduction of such policy on Iranian export sector can expand its related market structurally.