The effect of government size on unemployment rate in Iran
One of the most controversial and relatively old subjects in economics is the optimal size of government and its impact on macroeconomic variables. Government size and extent of public enterprises are of crucial impacts on economy. Thus, one of the main objectives of the governments is to achieve fu...
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| Format: | Article |
| Language: | fas |
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Tarbiat Modares University
2016-05-01
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| Series: | پژوهشهای اقتصادی |
| Subjects: | |
| Online Access: | http://ecor.modares.ac.ir/article-18-5971-en.pdf |
| _version_ | 1797803279893135360 |
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| author | mansour zarranejad Abdolkarim Hosseinpoor |
| author_facet | mansour zarranejad Abdolkarim Hosseinpoor |
| author_sort | mansour zarranejad |
| collection | DOAJ |
| description | One of the most controversial and relatively old subjects in economics is the optimal size of government and its impact on macroeconomic variables. Government size and extent of public enterprises are of crucial impacts on economy. Thus, one of the main objectives of the governments is to achieve full employment. This paper investigates the effects of government size on unemployment rate in Iran’s economy using annual data during 1959-2011. It applies Pesaran, Shin and Smith (PSS) bounds testing approach to estimate an Unrestricted Error Correction Model (UECM), which derives both dynamic and long-term relationships. The finding of the research shows that the government size has a significant positive effect on unemployment rate, indicating that reducing the size of government would lead to reduction of unemployment rate in Iran. With increases in size of government, the crowding out effect in the form of private investment is decreased. As a result, productivity growth and international competition are reduced, then the unemployment rate is increased. The estimation of the ECM model shows that the error term is negative and statistically significant. The Error Correction Term (ECT) is relatively low (-0.27) indicating a slow adjustment toward the equilibrium. |
| first_indexed | 2024-03-13T05:18:27Z |
| format | Article |
| id | doaj.art-ab745d974f8046c483dae6a3e5362da6 |
| institution | Directory Open Access Journal |
| issn | 1735-6768 2980-7832 |
| language | fas |
| last_indexed | 2024-03-13T05:18:27Z |
| publishDate | 2016-05-01 |
| publisher | Tarbiat Modares University |
| record_format | Article |
| series | پژوهشهای اقتصادی |
| spelling | doaj.art-ab745d974f8046c483dae6a3e5362da62023-06-15T20:21:44ZfasTarbiat Modares Universityپژوهشهای اقتصادی1735-67682980-78322016-05-01161191209The effect of government size on unemployment rate in Iranmansour zarranejad0Abdolkarim Hosseinpoor1 Professor of Economics, Shahid Chamran University of Ahvaz Assistant Professor of Economics, Persian Gulf University of Bushehr, One of the most controversial and relatively old subjects in economics is the optimal size of government and its impact on macroeconomic variables. Government size and extent of public enterprises are of crucial impacts on economy. Thus, one of the main objectives of the governments is to achieve full employment. This paper investigates the effects of government size on unemployment rate in Iran’s economy using annual data during 1959-2011. It applies Pesaran, Shin and Smith (PSS) bounds testing approach to estimate an Unrestricted Error Correction Model (UECM), which derives both dynamic and long-term relationships. The finding of the research shows that the government size has a significant positive effect on unemployment rate, indicating that reducing the size of government would lead to reduction of unemployment rate in Iran. With increases in size of government, the crowding out effect in the form of private investment is decreased. As a result, productivity growth and international competition are reduced, then the unemployment rate is increased. The estimation of the ECM model shows that the error term is negative and statistically significant. The Error Correction Term (ECT) is relatively low (-0.27) indicating a slow adjustment toward the equilibrium.http://ecor.modares.ac.ir/article-18-5971-en.pdfunemployment rategovernment sizecointegrationbound testing |
| spellingShingle | mansour zarranejad Abdolkarim Hosseinpoor The effect of government size on unemployment rate in Iran پژوهشهای اقتصادی unemployment rate government size cointegration bound testing |
| title | The effect of government size on unemployment rate in Iran |
| title_full | The effect of government size on unemployment rate in Iran |
| title_fullStr | The effect of government size on unemployment rate in Iran |
| title_full_unstemmed | The effect of government size on unemployment rate in Iran |
| title_short | The effect of government size on unemployment rate in Iran |
| title_sort | effect of government size on unemployment rate in iran |
| topic | unemployment rate government size cointegration bound testing |
| url | http://ecor.modares.ac.ir/article-18-5971-en.pdf |
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