Planning and Budgeting

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The paper tries to analyze effective factors on labor force demand in 14 economic sectors. It uses a dynamic model that is in accord with incomplete competition situations. The results of the study show that production, real costs of labor and capital respectively put heaviest effects on labor force demand. Production variable has a positive and significant effect on employment in all economic sectors except for commerce, restaurants and hotels ownership. Real costs of labor use have negative and significant effect on employment in all economic sectors. Nevertheless, real costs of capital had significant effect on labor demand in three sectors, yet the effect on three other sectors were positive and significant. At last, there was a negative and significant effect on the last eight sectors. Accordingly, labor and capital are substitutable in three sectors and complementary in eight sectors though the extent looks blurred and not easily comprehensible. Briefly, the policy of reducing capital real costs has far less positive effect on labor demand than labor real cost reduction policy. The study results inform that Iran’s 3rd development plan objectives on employment can not be materialized unless either production and investment growth rates exceed those of 3rd development plan projections or the real costs of labor are dramatically cut.

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