Abstract:
This article intends to estimate the optimal value of investment
and human capital in R&D sector of Iranian economy using an
augmented endogenous growth model. To do so, two issues
have been studied. First, an endogenous growth model has
been extended to include investment in R&D as an
independent variable. In the framework of this model, in order
to determine the optimal value of investment and human
capital in R&D sector, we derived the optimal path. Second,
using the optimal path and Iran’s economic data, the optimal
values of human capital and investment in Iran’s R&D sector
have been estimated. The results show that in order to be in a
steady state with 8% economic growth, it’s necessary to
allocate 0.7% of total human capital and 8% of national
income to R&D sector. However, at present, less than 0.3% of
human capital and less than 0.5% of national income is
allocated to R&D sector in the Iranian economy.
Machine summary:
Estimating Optimum Value of Investment and Human Capital in the R&D Sector of Iran Using an Augmented Endogenous Growth Model ∗ Ebrahim Hadian Shiraz University, Shiraz ehadian@rose.
com Abstract This article intends to estimate the optimal value of investment and human capital in R&D sector of Iranian economy using an augmented endogenous growth model.
Then, by determining the optimal path, and using the data of Iranian economy, it is going to estimate the optimum level of investment and the required human capital in R&D sector in order to reach a steady state with a 6% economic growth rate.
1. Calculating the optimum level of growth rate of variables in steady state In order to solve the model we must optimize the Hamiltonian function in equation (8): H = e-ρ t 1- 1 C σ + λ Y - C - δ K - R + λ ⎡ B R β (α L)γ Aθ ⎤ (8) 1- 1 σ 1 [ ] 2 ⎣ L ⎦ λ1 And λ2 are the shadow price for physical capital accumulation and accumulation of knowledge.
By taking logarithm and after that taking derivative with respect to time we will have: g* = g* (19) The summary of equations and the results of solving the model can now be summarized as follows: g* = g* = g* = g* = g* c k Y R g* = g* - n (20) Equation (20) indicates that, in a steady state, consumption growth rate g * , production growth rate ( g * ), physical capital accumulation c Y growth rate ( g * ) and growth rate of investment in R&D must be equal.