Estimates of Labor Mobility Costs in a Structural Model of Iran Economy

In this study, we construct a structural model of labor market in Iran in order to estimate the labor mobility cost using micro data. The model benefits from heterogeneity in age, gender, household location, and education and estimate varying labor mobility costs conditional on these factors and the origin and destination of the mobility. We find that 1) inter-sectoral labor mobility in Iran is substantial and range between 3 to 11 times of average per capita income 2) the labor mobility costs is higher for women, educated laborer, old, and rural population 3) if the cost vanishes to zero, the production in tradable and non-tradable sector increase by 36 and 16 percent, respectively. These estimates provide significant evidence that implementing major policy changes can bring substantial welfare loss especially for laborers with lower education and in rural areas.