Short-Term and Long-Term Effects of Government Size on the Growth of Employment in Iran During 1976-2011 (Using Bounds Test)

Employment is one of the triple basic factors of production i. e. land، labor، and capital; unlike other factors، labor cannot be stored، and this power will be lost if it cannot be used in production. Therefore، the necessity of the analysis of the employment is of special importance. The question of the involvement and the role of the State in the economy also has been one of the phenomena of interest to economists. The extent and the size of government and its effect on macroeconomic variables have a decisive role in the status of the economy. In this study، variables of government size، economic growth rate، the rate of inflation and the rate of private sector investment are as the explanatory variables، and the variable of employment is dependent variable in the form of a multiple variables regression. Finally the results of the model showed that size of government has a negative effect on employment، and the economic growth rate، the inflation rate and the rate of private sector investment have a positive effect on employment. The results of the estimation in period 1976 -2011 using the self-explanatory Auto Regressive Distributed Lag (ARDL) and Bound Testing Approach devised by Pesaran، Shin and Smith، showed that our dynamic pattern goes towards the long term pattern. Also the results of the error correction model indicate that it is corrected from its long-term path in each period at a rate of 56%.