Employment and its Affecting Factors in Iran's Informal Labor Market (1972-2006)

Authors

1 Professor of Economics, Islamic Azad University, Khorasgan Branch, Isfahan, Iran

2 M. A. in Economics

Abstract

One of the major concerns experienced by almost every country in the world is the
rising trend of hidden and informal economic activities. Following the formation of
modern economies, the presence of these informal activities has become a main
feature of labor markets. A lack of available employment in the formal sector, plus
the restrictions and complicated regulations which exist in this area, has forced
individuals to enter the informal labor market instead. Considering the significance
and the role that the labor market plays in providing economic equilibrium,
understanding this market and its natures and structures is becoming more and more
essential. By using Multiple Indicators, Multiple Causes (MIMIC) Model and
applying the Partial Least Squares approach, this study tries to estimate the share
informal workers have in Iran's labor market. Results indicate that during the 35-
year period under consideration (1972-2006) this share has witnessed a number of
ups and downs, but the overall trend seems to be in the increasing mode. The biggest
share is that of the (1990-2006) period, averaging around 21 percent. Total estimated
results indicate that, tax burden, inflation, and minimum wages are the most
important determinants of the aforementioned trend, with income distribution and
energy consumption being highly affected by this variable.

Keywords

Files

Share

How to cite

Statistics