In this study, we investigated the effect of "volatility" of investment in human capital on Iran’s economic growth, such that the government expenditure on educational and R & D budget have been replaced as proxies of human capital variable. Volatility of government expenditure on education and volatility in research and development budget have been estimated using the Generalize Autoregressive Conditional Heteroskedasticity (GARCH) Models. Coefficients of the short term and long term are estimated using Auto-Regressive Distributed Lag (ARDL) pattern. The results indicate that the costs of educational and R & D budget have a positive effect on economic growth, but the effect of volatility in these variables on economic growth is negative and significant. More addition, the effect of long term coefficients is more than the short term. Therefore, to achieve a high growth rate, development of human capital and its continuation is essential.
Keywords: Human capital, Volatility, R&D, expenditure on education, Economic growth