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Unemployment Conundrum in Iran

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Abstract

This paper examines the major causes of Iran’s unemployment conundrum using a simultaneous-equation model and annual time series data from 1968 to 2000. It is found that the rate of unemployment responds positively to output gap and increasing economic uncertainty and negatively to the higher growth rates of real investment and inflation, supporting the view that there exists a degree of trade-off between inflation and unemployment. However, since persistent and soaring inflation rates eventually lead to the chronic depreciation of the domestic currency and rising economic instability, it will be irrational to exploit this trade-off to fight against unemployment, particularly in the post-1979 revolution. Iran possesses one of the youngest populations in the world with approximately 40 per cent of its population less than 15 years. It is thus argued that if major tax and constitutional reforms are not undertaken, unemployment will continue to rise, depicting a sombre future for the next working age generation.

Suggested Citation

  • Valadkhani, Abbas, 2006. "Unemployment Conundrum in Iran," Economics Working Papers wp06-15, School of Economics, University of Wollongong, NSW, Australia.
    • Handle: RePEc:uow:depec1:wp06-15
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    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow012228.pdf
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    References listed on IDEAS

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    1. Farzin, Y. H., 1995. "Foreign exchange reform in Iran: Badly designed, badly managed," World Development, Elsevier, vol. 23(6), pages 987-1001, June.
    2. Pesaran, H., 1995. "Planning and Macroeconomic Stabilization in Iran," Cambridge Working Papers in Economics 9508, Faculty of Economics, University of Cambridge.
    3. Jerome Fahrer & Andrew Pease, 1993. "The Unemployment‐Vacancy Relationship in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 26(4), pages 43-57, October.
    4. D. T. Nguyen & A. Mahinda Siriwardana, 1988. "The Relationship Between Output Growth and Unemployment: A Re‐examination of Okun's Law in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 21(1), pages 16-27, March.
    5. Jane Haltmaier, 2001. "The use of cyclical indicators in estimating the output gap in Japan," International Finance Discussion Papers 701, Board of Governors of the Federal Reserve System (U.S.).
    6. Aghevli, Bijan B. & Sassanpour, Cyrus, 1982. "Prices, output and the trade balance in Iran," World Development, Elsevier, vol. 10(9), pages 791-800, September.
    7. Mohsen Bahmani-Oskooee, 1996. "Source of Stagflation in an Oil-Producing Country: Evidence from Iran," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 18(4), pages 609-620, July.
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    Cited by:

    1. Esfahani, Hadi Salehi & Mohaddes, Kamiar & Pesaran, M. Hashem, 2013. "Oil exports and the Iranian economy," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(3), pages 221-237.
    2. Somayeh Mardaneh, 2012. "Inflation Dynamics in a Dutch Disease Economy," Discussion Papers in Economics 12/25, Division of Economics, School of Business, University of Leicester.
    3. Somayeh Mardaneh, 2015. "Inflation Dynamics in a Dutch Disease Economy," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 19(3), pages 295-324, Autumn.

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    Unemployment; Iran;

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