One of the most important objectives of all countries is economic development and social welfare; to achieve this aim; it is necessary to have high GDP and it requires human capital and training of experts. To train specialized manpower, higher education plays an important role and it requires investment in higher education. The aim of this paper is to study the government spending (as an important element of investment and expenditure on education) in higher education along faculty members of higher education institutions on higher education along faculty members of higher education institutions in Iran's GDP during 1994-2014. For this purpose, we used Vector Autoregressive Models (VAR), impulse response functions and variance decomposition. Results reveal that government spending on higher education in cost credits and Capital Asset Acquisition credits has a significant positive effect on GDP. Further number of full-time faculty members increases the Gross Domestic Product (GDP).