Assessing changes in employment and unemployment in the Iran’s fourth and fifth development plans: A logarithmic mean Divisia decomposition analysis

Low rate of unemployment was one of the goals of the Iran’s development plans, but the Iranian economy has experienced a high rate of unemployment after the 1979 revolution. The present paper examines the changes of employment and unemployment in the Iranian economy using the decomposition method of logarithmic mean Divisia (LMD) over the period 2005-2016. Decomposition of the net changes of employment indicated that the economic growth was the main driver of employment, although the higher quantity of economic growth does not necessarily lead to an increase in employment (such as the fourth development plan). The decomposition of unemployment shown that the effect of increasing the active population on the labor market has been postponed through encouraging young people to attend university during the fourth development plan. However, in the fifth development plan, the demographic changes is offset by the lower unemployment rate so that number of unemployment maintain roughly constant. The findings indicate the importance of economic growth policies and also educational policies.