Studying and Comparing the Economic Growth Thresholds in Okun's and Verdoorn's Law; Application of PSTR Model for Iranian Provinces

In macroeconomics, the Okun's Law and Verdoorn's Law are used as methods for studying the relationship between economic growth and unemployment and employment. The necessity of studying these two laws together, in a threshold econometric model and considering to regional and spatial conditions of variables, can have more effective results in labor market policies. Therefore, in this study, due to the importance of employment and unemployment issue in Iran, have been investigated economic growth thresholds in the Okun's and Verdoorn's Law, using Panel Smooth Transition Regression and considering to spatial and non-spatial dimensions of variables. The results of model estimation for 30 Iranian provinces of during the period of 2005-2017 show that unemployment response to changes in production growth was higher than employment, this is true not only in non-spatial state, but also in spatial state and calculation of proximity matrix in economic growth. In addition, the results in spatial state than non-spatial state with stronger and faster changes, which is evidence of regional labor markets impact and macroeconomic situation and unbalanced development in each region, which has led to overflow in other areas. Of course, these effects, with crossed of threshold and entering second regime, have led to improvement in the labor market to increase employment and reduce unemployment, but effects of economic growth more have been on reducing unemployment than employment growth.