Document Type : Research Paper

Authors

• Salman Farajnia ¹
• Kowsar Yousefi ²
• Mehdi Fadaee ³

¹ Ph.D. Student of Economics, Institute for higher Education and Research

² Assistant Professor Faculty of Economics, University of Tehran

³ Assistant Professor of Economics and Systems Group, Institute for higher Education and Research

Abstract

The natural rate of unemployment is affected by a variety of factors, including sectoral shifts. However, the inclusion of such factors is ignored in most of the researches. We employ standard deviation of sectoral employment as a proxy for sectoral shift, and use it to calculate the natural rate of unemployment and the impact of unanticipated monetary policies on employment. The data is from the Labor Force Survey, 1384 to 1396. Results indicate that the sectoral standard deviation of employment has no significant effect on the unemployment rate. We interpret it due to the considerable share of permanent unemployment (those without any job in the past five years) in Iran's data with respect to seasonal unemployment. The permanent unemployment is about 40% in Iran while this number is 15% in the United States. Moreover, we find that the standard deviation of “job destruction” is negatively correlated with the unemployment rate. This might be due to less job destruction during the economic boom which causes the standard deviation to fall.

Keywords

• Labor Market
• Sectoral Shifts
• Fiscal and Monetary Policy
• Business Cycles