Long-Run Relation between Non-Oil Exports and Employment in the Iranian Economy

Using Vector Error Correction Model (VECM), this paper examines the relationship between non-oil exports and employment during 1338-1379 period. Results of Granger causality test indicate that employment is Granger cause of non-oil exports, but non-oil exports is not Granger cause of employment. Estimation of long-run relation between non-oil exports, employment and GDP without oil shows no significant relation between non-oil exports and employment. But GDP without oil has a significant and positive impact on employment. In estimated error correction equation for employment, two variables of oil exports and export promotion strategy are significant. Results based on sectorial investigation confirm a long-run relationship between employment and exports only in Industrial and Mine Sectors. In addition, estimated adjustment coefficient in this sector has a value of 0.23 which in contrast to its value in the whole economy (0.03) shows much higher speed of adjustment toward long-run equilibrium.