Quantitative Effect of Education on Economic Growth and Rural and Urban Household’s Welfare in Iran: A Structural Path Analysis Approach

Abstract

Introduction: Because of the close relationship between economic growth and well-being, many economists have sought to identify the sources of economic growth. Human capital, through increased quality, increased wages will enhance economic growth .Today, Development Economists studies shows government policy such as Investing in human capital and R&D expenditure affected on Income distribution and reduction of inequality in countries economics.Materials and Methods: This study is based on data of 2011 Iranian social accounting matrix using structural path analysis. The study population was included all the economic sectors and households in Iran. Sim sip -SAM software used for analysis of data.Results: With increase of 1 billion Rial in education sector, income of energy sector, services sector, Health sector, agricultural sector, industrial sector, and mining sector increased 0.0199, 0.0195, 0.0185, 0.0173, 0.012, and 0.0154 respectively. Among the quintile households, the fifth quintile Urban with 0.038 billion will have the greatest impact on expansion of the training and the total household income will increase to the extent of 0.229 billion.Conclusion: Expansion or regards to Education sector caused increase of income in household’s quintiles equally, in result, this issue reduced inequality, thus providing of free education will increase household welfare, economic growth and ultimately the economic development will be strengthened.