University of Tehran Iranian Economic Review 1026-6542 29 2 2025 07 01 Examining the Relationship between “Knowledge-Based Capital” and “Output per worker” in Iran’s Manufacturing Sector 450 474 103460 10.22059/ier.2025.349590.1007554 EN Narges Heydari Faculty of Management and Economics, Tarbiat Modares University, Tehran, Iran. Reza Najarzadeh Faculty of Management and Economics, Tarbiat Modares University, Tehran, Iran. Hassan Heydari Faculty of Management and Economics, Tarbiat Modares University, Tehran, Iran. 0000-0001-8915-6076 Kazem Yavari Department of Economics, Yazd University, Yazd, Iran. 0009-0008-5986-4408 Journal Article 2022 12 11 Researches show that knowledge-based capital (KBC) plays a significant role in modern economies, with this non-tangible type of capital being the greatest form of business investment and a major contributor to economic growth in advanced economies. Despite its importance as an important driver of economic growth, there are not enough researches that focus on the role of KBC in developing countries, so this paper aims to examine the relationship between KBC and Output per worker in Iran’s manufacturing sector. To achieve this, we utilized a two-step estimation method; in the first step, we estimated KBC as a latent variable in the Iranian manufacturing sector using exploratory factor analysis. In the second step, we examined the relationship between KBC and Output per worker in Iran’s manufacturing sector using a panel data regression analysis. Our findings indicate that KBC plays no significant role in Iran’s manufacturing sector. A probable explanation of lower level of complexity in manufacturing sector of Iran is that the sector is not enough developed to need such factors to produce innovative and knowledge-based products, so, the knowledge-based capital has not a significant role in that. In another words, the manufacturing sector in Iran is yet equipment based and more relies on primary materials rather than high level knowledge-based factors. https://ier.ut.ac.ir/article_103460_e899565312bd5f4cc67f68fa3e0380c8.pdf