Real Business Cycle Empirical Pattern  And Analysis of  Labor Policy in Iranian Agricultural Sector (With Emphasis on the Agronomy Subsector)

Hoseini, Safdar; Naeimifar, Afsaneh

Real Business Cycle Empirical Pattern And Analysis of Labor Policy in Iranian Agricultural Sector (With Emphasis on the Agronomy Subsector)

Authors

Safdar Hoseini

Afsaneh Naeimifar

Abstract

The Real business cycle theory was applied to investigate the hypothesis of cyclical agreeable treatment of real wages, for men and women work force, in the Iranian agricultural sector for the period of 1971-2006. On the basis of this theory, the impacts of supply side shocks (productivity and oil income shocks), are anticipated on the fluctuations of the real wages. The dominant effect of supply side shocks in determination of cyclical fluctuations of real wages is confirmed by the single equation estimation and the use of Kydland and Prescott pattern (1990) in interpreation of correlation coefficients. Impulse response functions show that the supply shocks increase real wage and employment in the short run while decreasing them in the long run. In the short run, this is because of marginal product increase (productivity shock) and external income increment (oil shock), but for the long run, this is because of substitution capital for labor (productivity shock) and price increase of imported inputs (oil shock). Results indicate that, for simultaneous attainment of employment increment and poverty reduction in the agriculture sector, one should use policies that augment foreign exchange instead of productivity increasing ones.

Keywords

Agriculture work force

Real business cycle theory

Real wage

Supply side shocks

Vector Auto regressive model