A General Equilibrium Analysis of Unskilled Labor Entry and Skilled Labor Exit in Iran

Haqiqi, Iman and Bahalou, Marziyeh (2015): A General Equilibrium Analysis of Unskilled Labor Entry and Skilled Labor Exit in Iran. Published in: The Economic Research , Vol. 3, No. 15 (23 October 2015): pp. 67-89.

Abstract

Labor migration affects domestic labor markets. This paper analyzes the impacts of decline in domestic skilled labor and increase inflow of foreign unskilled labor on employment and sectoral production in Iran. For this purpose, we develop a multi-sector computable general equilibrium model with both skilled and unskilled workers. To calibrate the model, we construct a Micro Consistent Matrix as a modified Social Accounting Matrix (SAM). We consider a counterfactual scenario of 10% increase in unskilled labor and 10% decline in skilled labor. The simulation results show that decline in skilled labor and increase in unskilled labor would increase the wage rate of skilled labor. Except for agriculture, the employment of unskilled labor in other sectors will increase by 1.6% to 14.4%. However, the domestic income is decreased despite of increasing wage rate of the skilled labor. The production of all sectors also declines by 2.9% to 3.9%, in such a way agriculture, mining and industry sectors face with the highest decrease in production.

• Item Type: MPRA Paper
• Language: Persian
• Keywords: Labor market, Employment, General equilibrium, Micro Consistent Matrix
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C68 - Computable General Equilibrium Models; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J21 - Labor Force and Employment, Size, and Structure; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers

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