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The first social, cultural and economic development plan in Islamic Republic of Iran (1368) is based on adjustment and reform structure. An increase of economic capacity, investment, economic growth and changes in protection policies were important goals of this plan. Therefore, privatization, decreasing the role of the state, price adjustment of goods and services, exchange rate adjustment and providing basis for competitive market, reducing subsides, export expansion and international trade liberalization were designed and followed in second and third plan.
Nowadays Iran's labor market has faced with disequilibrium crises. The population explosion of early revolution period (1358-62) and consequently the increase in labor market supply relative to employment opportunities in recent years resulted in employment problems and misery of labor class.
In this research it is tried to find out the effectiveness of macroeconomic policies, derived from the dominant view of free market economy on Iran's employment opportunities. It is argued that, although policy makers emphasized on free market theoretically, practically we have witnessed government interventions and increase in labor market regulations in different five-years plans (legal articles of 48 to 56, third development plan, shows this idea on the experimental part).
Neoclassic model, which is implemented with reduced form and stimulate equations in VAR, shows a significant effect of ECM with low speed of the short run equilibrium compared with the long run. The IRFs results illustrate that, by a shock in employment, supply of labor and wages have insignificant effects on employment, too. However, VDCs shows that the employment is the most important effective variables of employment fluctuations in the short run. But for the long run, the results indicate that the shares of effects of wage on employment, and labor and employment on employment fluctuations are 6%, 30% and 66%, respectively. In addition, the Dummy Variable of structural adjustment has positive and significant effect on employment.
Therefore, from the start of the first five-years plan(1368) up to now different planning theoretically were based on free market economy while in practice, policies and programs were dominated by government interventions and state regulations.
JEL classification: J64