Government Size and Unemployment in Iran

Unemployment is one of the most important challenges of Iranian economy that affects the society and economic performance. The aim of this paper is to investigate the impact of government size on unemployment rate in Iranian economy. By using the model of Christopoulos، Loizides & Tsionas (2005)، the relationship between government size and unemployment has been investigated during 1974-2012. The results of threshold model indicate that when the government size is less than 0. 2484، increasing of government size has a significant negative impact on unemployment but after the mentioned threshold value، due to crowding out effect of government intervence، government size has a significant positive impact on unemployment. Also، the results of estimation show that inflation has a significant negative impact on unemployment that confirms Philips curve in Iranian economy.