Economic Research and Perspectives

Economic Research and Perspectives

The Effects of Foreign Trade on Changes in Labor Force Productivity in Iran: An Input-Output Analysis

Authors
Mohsen Latifi 1
Nooraddin Sharify 2
1 Master of Economics, University of Mazandaran, Babolsar, Iran
2 Associate Professor of Economics, University of Mazandaran, Babolsar, Iran,
10.22034/ECOR.23.4.245
Abstract
Introduction:

International trade is usually associated with competition. During this competition, successful producers have lower production costs. Reducing the cost of production requires the use of different ways. One of these ways is the better use of primary production factors such as labor force. Thus, this paper attempts to investigate the effect of changes in foreign trade along with other effective factors on changes in labor force usage in Iran.

Methodology:

There are several methods to study the quality of labor force usage. The labor force productivity is considered as a criterion that is used in many researches. To this end, this study investigates the effects of foreign trade on labor force productivity changes in different production sectors. The data required for this research are provided from the input-output tables of 2011 and 2016, the national accounts and the results of the population and housing census for the years 2011 and 2016. For this purpose, first, symmetric tables of the sample years have been made with the assumption of sector technology, using consumption and supply tables of these years. Then, in order to calculate productivity and compare them in the sample years, the dimensions of the created tables have been standardized. Finally, using the Structural Decomposition Analysis (SDA) approach, the effects of changes in trade balance, along with export and import ratio to trade balance, export and import structure, self-sufficiency, production technology and employment on changes in labor force productivity are determined.

At the sectoral level, the value of the production of the industrial sector in 2016 compared to the corresponding value in 2011 (at the price of 2016) has decreased due to the recession prevailing in this sector. The value of products at fixed prices in trade and repair and mining sectors, including crude oil and natural gas, has decreased due to reasons such as sanctions and low economic growth in these periods. In contrast, the value of production shows an increase at a fixed price in the public affairs, defense and social security /real estate and real estate services/transportation and agriculture sectors.



Results and Discussion:

The total value of production in 2016 compared to 2011 has increased nearly 2006.70 million Rials at the price of 2016. The number of employed people in the country has increased by 2,113,120 people during this period. Because of these changes, the productivity of the country's labor force has reached from 1038.12 million Rials in 2011 (at the price of 2016) to 1029.84 million Rials in 2016, which shows a decrease of 8.28 million Rials.

At the sectoral level, the value of the production of the industry sector in 2016 compared to the corresponding value in 2011 (at the price of 2016) has decreased due to the recession prevailing in this sector. The value of products at fixed prices in trade and repair/ and mining sectors, including crude oil and natural gas, has decreased in these years due to reasons such as sanctions and low economic growth. In contrast, the value of production shows an increase at a fixed price in the public affairs, defense and social security/real estate and real estate services/, transportation/ and agricultural sectors. In view of employment, the agricultural sector has faced a decrease in employment during the study period. In contrast, the industrial/, and trade and repair/ sectors have faced an increase in employment. Because of these changes, the industry/, trade and repair/ sectors have faced a decrease in labor productivity. Whereas the agriculture sector/, transportation/, public affairs administration, defense and social security/ and the activities of real estate and real estate service companies/ have faced an increase in labor productivity.

From the point of view of foreign trade, the industry sector has seen the largest increase in exports, while the electricity sector has faced the largest decrease in exports. In terms of imports, the industry sector has experienced the largest increase, while the education sector has experienced the largest decrease. The correlation coefficient between the exports of the sectors and the productivity of their labor force has been positive. While the correlation coefficient of the different sectors with the productivity of their labor force has been negative. However, the value of these correlation coefficients shows a decrease in 2016 compared to 2011.

Conclusion:

The results of research show that foreign trade has improved labor productivity in the country. In addition, the exports of sectors have relatively similar relationship with the productivity of their labor force, in contrast, the import of goods has an inverse relationship with the productivity of their producing sectors. However, this issue has received less attention in 2016 compared to 2011, which has led to changes in the structure of exports and imports to reduce labor force productivity.
Keywords
Labor Productivity
Input-Output Analysis
Structural Decomposition Analysis
Foreign trade

Subjects

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Economic Research and Perspectives
Volume 23, Issue 4
Winter 2024
Pages 245-267