The Unemployment-Labor Force Participation Linkage in Iran's Women Labor Market

Abstract

Purpose During recent years, the long-run relationship between the unemployment rate (UR) and the labor force participation (LFP) rate has been examined in-depth in developed and developing economies. This paper aims to explore this relationship for Iranian women in 31 provinces from 2005Q2 to 2019Q1. Design/methodology/approach To examine the existence of a long-run relationship between female LFP and UR, the time-series cointegration approach has been used. Furthermore, regarding the low power of the univariate cointegration approach, the authors consider a panel version of the cointegration tests developed by Westerlund. Findings Both time-series cointegration tests and panel cointegration test support the unemployment invariance hypothesis for most Iranian provinces, especially the most religious ones. As it implies an invariance to supply side policies, it seems that reducing legal and cultural barriers could be more relevant to decrease female UR and increase LFP than training programs or R&D policies. The present results also suggest that, for this group of regions, a more centralized policy design could be appropriate, instead of a regional one. Originality/value This study investigates whether the unemployment invariance hypothesis holds for Iran, which has not been analyzed before for the Iranian labor market. Moreover, the study adopts a regional approach, which takes into account the huge regional differences in Iran.