Estimating the impacts of economic sanctions on employment in the industry, agriculture and service sectors in Iran

Document Type : Research Paper

Authors

1 Assistant Professor, Economics, Tarbiat Modares University, Iran

2 Associate Professor, Economics, Tarbiat Modares University, Iran

3 Mesters, Economics, Tarbiat Modares University, Iran

Abstract

Introduction: The challenge of employment is not only one of the most important social issues in the country today but also, considering the rate of population growth in the last two decades, the most important socio-economic challenge of the next few decades. The immediate consequences of this crisis are the spread of poverty and the increase of other personal and social harms, which naturally endanger social stability and cohesion. On the other hand, it is clear to everyone that the process of growth and development has various social, cultural, environmental, geographical, economic and political dimensions. In thisregard, the employment of the labor force has required that the factors affecting employment be considered. Among these, the industrial, agricultural and service sectors are the most important economic sectors that play significant roles in creating employment, which have inevitably been affected by economic sanctions. Unilateral and multilateral economic sanctions imposed on the country by various organizations and countries have disturbed the balance of the labor market. Therefore, providing a clear picture of the current situation in the economy, especially in the field of labor market, and the timely analysis of these developments have important effects on the quality of economic policies, specifically for the labor market and the other related sectors and markets.
Methodology: Considering the importance of employment in the progress of the country, this study examines the factors affecting the employment in industry, agriculture and services during the period of 2016-2018. In order to investigate the effect of economic sanctions in the first step of the present study, an attempt was made to use a new indicator to measure sanctions in economic modeling. For this purpose, a series of factor analyses were done, and eleven variables that had high impacts of sanctions were used in the sanctions indexing process. The variables affected by sanctions referred to those that were in the first layer of the economic sanctions on the country. In other words, these variables were highly sensitive to the imposition of international economic sanctions. They were often considered as the main impacts of sanctions on the key variables of the country's economy. For this purpose, after the variables affected by the embargo were introduced and the related descriptive statistics were done, the factor analysis followed through a few steps including a) selection of appropriate variables, b) initial extraction of factors, c) final extraction of the factors by factor rotation, and d) scale construction and naming the agents. Furthermore, considering that the effects of economic sanctions on the level of employment are indirect and through the production channel, a system of simultaneous equations was used to estimate the impact of economic sanctions on employment. In order to achieve the goal of research, two different models that showed the direct role of economic sanctions on economic growth and their indirect effect on employment were extracted from the production channel in the three sectors of industry, agriculture and services.
Results and Discussion:  The variables were estimated according to the special conditions of the system of equations. For this purpose, first the system of equations and the model variables were introduced, and then the tests of significance, synchronicity, diagonality and diagnostic problem were performed to estimate the system of equations. According to the results of these tests, an appropriate method for the system of simultaneous equations was selected from the methods of OLS, 2SLS, 3SLS and SUR. According to the test results, the system of equations related to industry and services should be estimated as 3SLS and the system of equations related to agriculture as 2SLS. In the three-stage least squares (3SLS) method, the relationships among the equation disturbance sentences in a system are taken into consideration. In the two-stage least squares (2SLS) method, however, the relationships are not considered and only endogenousness is discussed.
Conclusion: The results show that the impacts of sanctions on the employment in the three sectors of industry, agriculture and services are not the same and economic sanctions have significantly reduced the employment in industry and services. The imposition of sanctions on the industrial sector and the reduction of industrial growth can subsequently have a reducing effect on the growth of the service sector. The results also indicate a positive and significant effect of economic sanctions on the employment in the agricultural sector during the research period. In fact, the agricultural and food industries suffer less from economic sanctions due to their indigenous nature and low dependence on foreign countries.

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References

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The Journal of Economic Policy
Volume 13, Issue 25
October 2021
Pages 65-107

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