Life Science Journal, 2012;9(1) http://www.americanscience.org http://www.sciencepub.net/life lifesciencej@gmail.com 367 Factors Affecting Public Sector Investment in Agriculture in Iran: The Usage of Unrestricted Error Correction Model Seyed Nemat Allah Mousavi, Azadeh Dogani and Javad Torkamani Department Of Agricultural Economics, Marvdasht Branch,Islamic Azad University,Marvdasht,Iran *Corresponding author: mousavi_sn@yahoo.com Abstract: Agriculture in Iran is the greatest economical sector after petroleum and services sectors which has devoted about 20 percent of national gross production and main share of non- petroleum exports, so that, this section development has determinate role in economical growth. Investment in agriculture section is one of factors which due to increase in demand for food and other agriculture products can cause to develop production and more employment in agriculture section. Therefore, in this section, it has been tried that Long- term effect of parameters such as petroleum incomes, investment stock, value-added, national income and inflation rate on state or governmental investment by use of conditional ARDL pattern is in frame of Pesaran and Shin (It applies for time series and variables can be I (0) or I (1)), this is studied for 1356-1386 periods. The results of this study showed that there is Long-term relation between governmental investment, petroleum incomes, investment stock, value-added, national income and inflation rate. On the other hand, governmental investment has the most and least sensitive to Value-added and petroleum income, respectively. [Seyed Nemat Allah Mousavi, Azadeh Dogani and Javad Torkamani. Factors Affecting Public Sector Investment in Agriculture in Iran: The Usage of Unrestricted Error Correction Mode Life Science Journal 2012;9(1):367- 373]. (ISSN: 1097-8135). http://www.lifesciencesite.com . 53 Key words: Governmental investment, ARDL model, error correction model, elasticity. INTRODUCTION Agriculture section is one of the most important sections in Iran economy. It is done about one-quarter of gross domestic production and foreign exchange incomes resulting from non-petroleum goods exports and country employment and to meet needs about 80 percent of society food needs via this section on one hand, it is created evolution in this section about high population growth, continuous increase in food demand and increasingly need in various economical section to agriculture products, so that it can increase in quantity and variety of different products in short time (Hazhbar kiani & Jhonvislo 1379). In addition, 43% of country population live in village, so the living of many of them is related to this section. Hence, agriculture section is considered as development axis (Kiani rad & Koopahi 1379). Generally, among investment in agriculture section has important role and specific place. The investment in agriculture section, due to increase in demand for food and other agriculture products, can cause to develop production and employment. In fact, increase in demand cause to enhance prices levels and increasing price levels cause to enhance motive for investing. Therefore, more investment is accompanied by production growth and more employment. Besides, prior and post relation of agriculture with other parts helps to develop production and employment in them. Most of agriculture activities are done in rural regions, thus investment development in agriculture section in frame of public and private investment can cause to create more occupational opportunity in rural regions, as a result it causes to prevent rural-people immigration to cities and increase in growth rate at agriculture section (Amini & Falihi 1377). On one hand, the study of changes trend in production and imports at agriculture section clear this fact which by existing increase in main agriculture products manufacture, it is also provided main share of agriculture products by imports. It is necessary to pay attention to agriculture section via the study of agriculture section share from total value-added and human resource employment and its comparison with investment share in this section of whole investment country. In respect to importance of agriculture section in economical growth and development and investment power to enhance agriculture products manufacture and to develop this section, the investment has typical importance in it (Hazhbar kiani & Jhonvislo 1379). In Iran, the subject of invest and investment is accompanied by tremendous problems because of server dependence to petroleum incomes and its price unstable and to be high risk, in this reason investment in various sections such as agriculture one has had server fluctuation. In agriculture section, the problems related to investment have been more obvious due to existing structural bottlenecks and lack of financial equipments of most beneficiaries. In respect to this point that agriculture section has important role in domestic gross production and employment and it