The Effect of Fiscal Policies on Labor Demand in Iran

The labor market is one of the main markets in the national economy and the equilibrium of the labor market is one of the main concerns of policymakers in every country. Theoret-ical foundations and empirical studies show that labor demand is the main factor in creat-ing employment and equilibrium in the labor market. This article evaluates the effect of fiscal policy on labor demand in Iran from 1976-2018. During this period, the government has implemented employment-generating projects, tax and insurance exemptions via annu-al development programs and budgets, and encouraged investment in areas with high unemployment rates. we examined the effect of current government expenditures, gov-ernment development expenditures, and taxes to study the effect of government fiscal policies on labor demand. In this article, we estimate the dynamic function of labor de-mand using the ARDL technique. According to the theoretical foundations and empirical studies in the specified function, labor demand is a function of intermittent values and independent variables of Gross Domestic Product (GDP), real wages, capital stock, cur-rent government expenditures, government development expenditures, tax revenues, and dummy variables of imposed war and the UN Security Council sanction. The results showed that fiscal policy has not had a positive effect on labor demand in the Iranian labor market in the short and long term.