The study of oil incomes on the employment in Iran based on auto regression model with wide intervals

Abstract

Unemployment is so important and sensitive that in most of developing countries, high unemployment rate is considered as one of the most important signs of underdevelopment. It is clear that employment creation in any economic sector needs investing. On the other hand, oil incomes have been always considered as one of the main resources of state income in the economy. Because oil has a double role both in providing energy needed for economic development plan and providing currency needs of these plans, it is a driving force and key sector of national economy. Given to the mentioned issues by ARDL method, this research studies the effect of oil and nonoil incomes on the employment in Iran during 1961-2006. The method of error correction model was used in order to estimate the short-term relationship between variables in which most variables were meaningful at 90% level and the coefficient of error correction term equaled -0.2436 that shows 0.24 adjustment of imbalance of one period in employment during next period and so adjustment toward balance is slow. R2 value is also 0.98 that indicates high explanatory power of pattern. In long-term adjustment relationship, intercept has no effect and according to unit root hypothesis test, there is long-term adjustment relationship between variables of pattern and all variables are meaningful. Coefficient of oil and nonoil incomes variables is positive and revolution dummy variable is positive and the coefficient of gross domestic production and dummy variable for years of war is negative.