Unemployment and Government Size, Is the Relationship Acceptable?

Abstract

The goal of this paper is investigating the relationship between unemployment rate and government size in Iran. For that, we have used some VAR models, which include the following variables: government size which is measured by total government outlays as a percentage of GDP, unemployment rate, real GDP growth rate, inflation rate, and minimum wage. The results reveal that a large government sector would raise unemployment, and an increase in GDP growth rate, inflation rate and minimum wages are likely to decrease unemployment rate.

Keywords

• unemployment rate
• government size
• vector autoregressive model (var)
• total government outlays