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Human Resources in Iran: Potentials and Challenges

Published online by Cambridge University Press:  01 January 2022

Djavad Salehi-Isfahani
Djavad Salehi-Isfahani*
Affiliation:
Virginia Tech
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Extract

Critics of economic development strategies followed by most Middle Eastern countries often point to their lagging human development indicators as a sign of failure. While it is true that the growth performance of these countries has been generally quite poor since the 1980s—only Sub-Saharan Africa has had a worse experience—it is not true that they have failed to expand education. In fact, the rate of growth of years of schooling in the Middle East and North Africa (MENA) has been the fastest of any region in the last forty years.

The difficulty for economic growth appears to lie in translating this rising education into rising productivity. Doing so is not just a matter of restoring growth, though that is an essential task, but to alleviate acute social pressures arising from youth unemployment fuelled by rapid population growth. For quite a while these employment problems were solved by accumulation of physical capital bought with oil. With that option no longer viable, solutions for human resource problems must be found elsewhere, particularly in the markets for labor and human capital.

Type
Articles
Information
Iranian Studies , Volume 38 , Issue 1: Special Issue: Iran Facing the New Century , March 2005 , pp. 117 - 147
Copyright
Copyright © Association For Iranian Studies, Inc 2005

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References

1 United Nation, Arab human development report 2002: creating opportunities for future generations, (New York, NY: United Nations Development Programme, 2002)Google Scholar.

2 Salehi-Isfahani, Djavad, ‘Population, Human Capital, and Economic Growth in Iran’, in: Sirageldin, Ismael, editor, Human Capital and Population in the Middle East, (I. B. Tauris, 2002)Google Scholar; Salehi-Isfahani, Djavad and Murphy, Russell D., “Labor market flexibility and investment in human capital,” unpublished, Department of Economics, Virginia Tech, 2004Google Scholar.

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6 For a survey of his work see Becker, Gary S., ‘Fertility and Economy’, Journal of Population Economics, 5 (1992): 3CrossRefGoogle ScholarPubMed.

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8 The estimated equation for the curve is y = 7,11 ¡ 1,00x + 0,046x2, where y is fertility (TFR) and x the average years of schooling for the population 25 years and older. All coefficients are significant at one percent level and R2 = 0:73.

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10 Among MENA countries for which data were available, only Sudan and Yemen are low income according to the above definition; Persian Gulf exporters are high income and the rest are middle income.

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14 For a general discussion of how the demographic gift can help economic growth, see Barlow; Bloom and Williamson; Bloom, David E., Canning, David and Sevilla, Jaysee, Economic Growth and the Demographic Transition, (National Bureau of Economic Research, 2001)CrossRefGoogle Scholar (W8685).—Technical report; Bloom, David E., Canning, David and Sevilla, Jaysee, Demographic Dividend: A new perspective on the economic consequences of population growth, (Santa Monica, California: Rand, 2002)Google Scholar (MR-1274).—Technical report; for an application to Iran, see Salehi-Isfahani, Djavad, ‘Demographic aspects of economic development in Iran’, Social Research 67 (2000): 2Google Scholar; Salehi-Isfahani, ‘Population’.

15 Unlike the other two, the age structure for 2002 is derived from survey rather than census data. As such it is not strictly comparable with them. However, the survey numbers have been scaled up to the country as a whole, using sampling weights.

16 United Nation, Arab human development report 2003: building a knowledge society, (New York, NY: United Nations Development Programme, 2003)Google Scholar.

17 Topel, Robert, ‘Labor Markets and Economic Growth’, in: Ashenfelter, Orley and Card, David, editors, Handbook of Labor Economics, Volume 3, (Elsevier Science B.V., 1999)Google Scholar. – chapter 44; Pritchett, Lant, ‘Where has all the education gone?’ World Bank Economic Review, 15 (2001): 3CrossRefGoogle Scholar.

18 Pritchett, ‘Has education had a growth payoff in the MENA region?’.

19 According to the 2000 Employment Survey, unemployment rates for men with secondary education was 22 percent and with tertiary education 10 percent; for women 44 and 18 percent, respectively.

20 Christopher Pissarides, “Labour markets and economic growth in the MENA Region: The role and relationship between human capital and growth,” ERF, Cairo, 2000; Pritchett, ‘Where has all the education gone?’ and Pritchett, ‘Has education had a growth payoff in the MENA region?’.

21 The discussion of the interaction between the labor market and education draws from Salehi-Isfahani and Murphy, “Labor market flexibility.”

22 Salehi-Isfahani, Djavad, ‘Labor and the Challenge of Restructuring in Iran’, Middle East Report, 28 (1999): 210Google Scholar; Salehi-Isfahani, ‘Population’.

23 Author's calculation, SECH data, 1992 and 2001.

24 Author's calculations, 1992 and 2001 SECH surveys.

25 See Salehi-Isfahani and Murphy, “Labor market flexibility,” for a comparison of investment outcomes in labor markets with different institutions.

26 The text of the Law is available in English from the International Labor Office website http://www.ilo.org, and in Persian from Resainia, Nasser, Majmoue ghavanin kar Joumhouri Eslami Iran (The Complete Labor Law of the Islamic Republic of Iran), (Tehran, Iran: Saman, 1996)Google Scholar. For a discussion of its main features see Salehi-Isfahani, ‘Labor and the Challenge of Restructuring’ and Tabatabai, Hamid and Salehi-Isfahani, Djavad, ‘Population, labor, and employment in Iran’, in: Salehi-Isfahani, Djavad, editor, Labor and Human Capital in the Middle East: Studies of Markets and Household Behavior, (London: Ithaca Press, 2001)Google Scholar.

27 Salehi-Isfahani and Murphy, ‘Labor market flexibility’ show how, when unable to lay off workers hired by mistake, rational private employers emphasize objective test results and formal schooling rather than take a chance with weaker signals of productivity.

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30 Mammen and Paxson, ‘Women's work’. For determinants of women's market work in Iran, see D. Salehi-Isfahani, “Market work of women in Iran,” paper presented in the 10th Annual Conference of the ERF, Sharja, 2002.

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32 Moghadam, Valentine M., ‘Women's Employment Issues in Contemporary Iran: Problems and Prospects in the 1990s’, Iranian Studies, 28 (1995): 3–4CrossRefGoogle Scholar; Tabatabai and Salehi-Isfahani, ‘Population’.

33 Mehdi Shafaeddin, Diversification, Employment and Development: Towards A Long-Term Strategy for an Oil-Exporting Country; The Case of Iran, (2001) – ERF Working, number 2001–13, Cairo, Egypt; World Bank, ‘Iran: Medium Term Framework’.

34 Central Bank of the Islamic Republic of Iran, Annual Report, 1381 (2002/03), (Tehran, Iran, 2003) p. 13.

35 James Heckman has used the term human capital policy to discuss education and labor market linkages in the United States in Heckman, J. and Klenow, P., ‘Human Capital Policy’, in: Boskin, M., editor, Policies to Promote Capital Formation, (Stanford, CA: Hoover Institution)Google Scholar, and Pedro Manuel Carneiro and James J. Heckman, Human Capital Policy, (Institute for the Study of Labor (IZA), Discussion Paper number 821, 2003).

36 Salehi-Isfahani, ‘Population’.

37 Reported in an interview with the Deputy Minster of Education, Hamshahri, Interview with Rahim Ebadi, Deputy Minister of Education, January 10 2000.

38 The book Harvard Girl has sold 1.6 million copies in China (Harvard Magazine, July–August 2002).

39 Caldwell, John C., ‘Toward a Restatement of Demographic Transition Theory’, Population and Development Review, 2 (1976): 3–4CrossRefGoogle Scholar.

40 In addition to these, there are employment surveys which only span the more recent years but are more specialized on employment. They are not used in this paper.