The quantitative relationship between higher education and economic growth in the tradition of “growth accounting equations” and also “neoclassical production function” approach have occupied a pride of place in economics of education, particularly the literature on more developed countries. However, production function type models that allow for isolating the “indirect” (external) effects of higher education on economic growth and for measuring factor productivity differences between higher and non - higher education sectors appear to be lacking. This paper is a contribution towards filling this gap and also towards meeting the demand of Iranian educational planners for having educated manpower forecasts, based on alternative forecasting models including the more traditional “factor demand approach”. The methodology of this paper might also be of use to other developing countries that might wish to endeavor educational programming.
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