An Input - Output Assessment of Employment, Efficiency, Income Distribution and Growth Strategies in Iran

This Paper has used a multisectoral input-output model of Iranian economy to examine the ability of different sectors of economy to create jobs per unit of output as well as capital. The results reveal that there is no conflict in a growth strategy that simultaneously attempts to improve efficiency i.e. reallocating production to sectors with low DRCs, equity and job creation. Although sectoral performance on these measures is not perfectly correlated, but in general we find good performance on equity associated with a relatively high degree of efficiency. The results of this paper led some interesting insights into the debate regarding distributive impact of structural adjustment in Iran. If Iran move closer to free trade regime with undistributed relative prices, it is reasonable to expect that the sectoral allocation of production would be altered in favor of these sectors in which Iran has comparative advantage. The measures of efficiency, domestic resource cost (DRC), provide an important benchmark for measuring comparative efficiency. Thus if Iran were to move closer to free trader it is reasonable to expect that the composition of production should shift in favor of low DRC sectors. With respect to positive correlation between performance in efficiency (low DRC), employment, and income inequality, this implies that structural adjustment, by shifting the composition of production in favor of low DRC sectors, will contribute to better income distribution.