The effect of Knowledge - based Employment on Economic Growth of Iran

Experience of Developing countries in the field of economic growth and various studies have shown that the estimated economic growth rate only through capital and labor factors of production will not lead to a precise result. Economists have to use knowledge as a pivotal tool in their economic research. Knowledge based economy is an economy based on production, distribution, transformation and utilization of knowledge, On this basis, the higher education plays a crucial role in a knowledge based economy. It seems that attempt in making knowledge oriented employment in various countries may be an important factor in the establishment of sustained economic growth. For this purpose, in this paper by applying an indigenous model of growth, the effects of knowledge based employment and physical investment in Iran has been analyzed. The economic growth of Iran as an indigenous variable, is a function of knowledge based employment and physical capital. The indigenous model used in this research, has been estimated with five steps co integration approach of Johansson and Vector Error Correction Model. The two co integrated model obtained in this approach, show that in the long run, the relation between the index of knowledge based employment and increase of physical capital on the economic growth of Iran is positive and significant, Both vectors show that in the long run the index of knowledge based employment has the highest effect on the economic growth of the country.