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Separation of Employment and Production, and Capital Intensive Iranian Economy

Sabouri, Marjan | 2020

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 53417 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Nili, Masoud
  7. Abstract:
  8. In the Iranian economy, the unemployment rate has always been volatile and double-digit, and this has had a devastating effect on people's livelihoods and the welfare of society. Therefore, job creation has always been the main concern of policymakers. To increase employment, based on the Okun's law, the output must be increased. Since from an economic point of view, economic growth should be accompanied by employment growth and there should be a positive relationship between the employment growth rate and the country's economic growth rate. But in 1384 to 1398, the Iranian labor market has experienced a puzzling behavior in terms of the growth of the total number of employees and the growth of GDP. In this study, the purpose is to show and analyze the separation of the relationship between output and employment. Capital stock is also introduced as the most important input affecting production, which explains the long-term behavior of economic growth. For this purpose, the method of Auto-Regressive Distributed Lag (ARDL) has been used. The estimation results indicate a significant positive effect of non-oil capital stock and then oil revenues and a non-significant effect of labor force on non-oil GDP in the long-term period. Also, in the short-term, non-oil GDP shows a significant negative relationship with the second lag-in employment. Examining employment and output in small and large firms, we found that the main employment was in small businesses and the main output was in large firms. Examining the correlation between the growths of value added of large firms and small businesses and comparing them with other countries, we found that probably, large firms have not been the drivers of small businesses. It means probably output growth, which took place mainly in large firms, did not transfer to labor forces, who were mainly employed in small businesses. Also, by examining the labor force density in small businesses and large firms, we found that on average, one person in large firms creates more added value than 5 times as many people working in small businesses did. Comparing this ratio with other countries, which is less than 1, we found that 5-fold productivity cannot be due to personal skills of individuals, but probably the lots of capital stocks in large firms along with low employment have been able to create lots of added values. This fact maybe can be another stylized fact that confirms the capital intensive of the Iranian economy and the separation of output and employment
  9. Keywords:
  10. Gross Domestic Product ; Employment ; Companies ; Autoregressive Distributed Lag Model ; Large Firms ; Small Businesses ; Capital Stock

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