Impacts of Import Tariff Cuts on the Iranian Labor Market Structure: a Computable General Equilibrium Model Approach

Abstract Most debates about the role of tariff cuts on the level of employment and rate of wages in labor market have come out of well-known Hecscher – Ohlin and Stopler – Samuelson (HOS) theorems. Considering the fact that we have divided the workforce into skilled and unskilled labors; the present paper assesses the impacts of tariff cuts on labor market indicators in Iran. To address these issues, a computable general equilibrium (CGE) modeling approach and social accounting matrix (SAM) of 2002 have been applied. Results show that general import tariff cuts along with the decreasing wage inequality increase the level of total employment, while tariff cuts in unskilled labor-intensive commodities such as those of agricultural commodities decrease the level of total employment, and consequently lead to an increase in wage inequality. However, under the effect of the tariff cuts in skilled labor-intensive commodities like food, apparel and textile, level of total employment increases and wage inequality decreases, respectively. JEL Classification: F16; J21; J31