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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
JUNE 2011
VOL 3, NO 2
First, Mankiw-Romer-Weil estimated Solo's simple model (without human capital) (relation (11) when β=0), results
of estimation were in the way that coefficient was equal to 1.4, i.e. α was about but it should be about
(in other words capital share in production was overestimated) and on the other hand coefficient of determination
had been equal to 0.59. In the next step, they estimated the model with the existence of human capital and used a
share of population of the educated work force as representative of human capital. In this state coefficient of
determination obtained 0.78 and physical capital coefficient was equal to about . Mankiw-Romer-Weil concluded
that investment in human capital and physical capital explained 0.78 of income per capita difference among the
countries by a common investment and meanwhile amounts of parameters were rational and significant (Acemoglu,
2009).
6. Specification of the model and data
Generally economists have applied three main approaches for evaluation of economic benefits and consequences of
investment in human capital experimentally (Dehghani et al, 2010): 1- correlation method 2- analysis method of
cost-investment profit in education 3- method of considering of educational index as the productive data in the
production function.
In this survey the third method is used that is the most-used method and Cobb-Doglas production function has been
applied. This function has been specified as the best function in terms of adaptation and conformation with
economic conditions because of its appropriate functional form and saliency of internal relations of its variables.
(12)
In this relation, Q is gross domestic product, L is labor force, K is physical capital inventory, H is human capital and
A is the technology coefficient.
(13)
By logging of natural logarithm from two sides of the relation (12) the obtained model is as below:
(13)
Coefficients of α, β, γ in the above equation are elasticity of production with regard to the labor force, physical
capital inventory and human capital respectively. In order to examine the impacts of production factors such as
education on economic growth, both sides of the equation (13) are differentiated to obtain the final form. The
mathematical final form of the model is:
(14)
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