The Effects of Deregulation in Goods and Labor Market on Iranian Economic Growth and Unemployment: A Dynamic Deterministic Equilibrium Model

Abstract

Studies show that the existence of strict rules in the goods and labor markets is one of the main factors creating high unemployment rates and low levels of employment. In this study, a permanent reduction in policy parameters, reduction of barriers to entry in the commodity market, reduction of dismissal costs, reduction of unemployment insurance benefits have been investigated. The findings of this study show that deregulation in Iran's commodity and labor markets reduces economic growth and increases unemployment in the short run, but has a booming effect in the long run, increasing economic growth and reducing unemployment. But simultaneous deregulation in the two markets reduces the level of inefficient fluctuations in the margins of prices paid by the consumer and received by the producer, which disrupts the equilibrium decisions of economic units, and has synergistic effects on increasing growth and reducing unemployment. Therefore, it is recommended that policymakers use the interdependence of policies to increase the effects of prosperity and determine reform policies in the form of package.

Keywords

• unemployment rate
• economic growth
• trade cycles
• deregulation