An Empirical Examination of the Relationship between Productivity and Unemployment: Simultaneous Equations Approach

This study examines the relationship between unemployment and productivity growth in Iran over the time period 1359-1389 (1980-2010). Recently، studies on this relationship have had different and sometimes opposite results. We have examined the relationship between the growth rate of productivity and the rate of unemployment by using Granger Causality test and Hausman Test in the estimation of simultaneous equations. Our results show a bilateral causal relationship between these two variables; that is، the increase in productivity cause the rate of unemployment to decrease and the decrease in the rate of unemployment cause productivity to increase، a result in line with learning by doing effect.