The Impact of Public Employment on the Private Labor Market: A Regional Approach to the Labor Market in Iran

Based on the effect of crowding out, creating a job in the public sector leads to the withdrawal of private sector jobs, or, by the multiplier effect and by playing a complementary role in economic activities, causes increasing production and, consequently, creating private sector jobs. These two effects were studied using the data of 30 provinces of Iran during the years 1384 to 1395 and at the level of the regions. The results demonstrate the crowding out effect in the area. In order to investigate the hypothesis that the crowding out effect in industrial regions is stronger than other regions, the share of value added of the industrial sector of each region was considered as a proxy for the industrial level of the region and the threshold regression model was estimated. The results of this model do not confirm the validity of the above hypothesis in Iran's economy, and it is justified by the role of quasi-governmentals in the economy and their contribution to industrial production.