Firms Reaction Against Demand Uncertainty Risk and Its Effect on Labor Employment (Case Study on IRAN Manufacturing Sector)



The quality of firms’ reaction against demand uncertainty affects the production inputs employment. In this research I have studied and compared the behavior of active firms in manufacturing sector with respect to the risk attitude and tested it’s effect on production inputs combination(with the special emphasize on labor employment).
The research findings reveal that active firms in manufacturing of food, beverage and tobacco products (code31), manufacturing of textile, wearing apparel and leather products (code32) and manufacturing of wood and products of wood (code33) don’t significantly react against the risk resulted from demand uncertainty so demand uncertainty has not significant effect on capital-labor ratio. In manufacturing of paper, publishing and printing (code34), due to the risk averseness of the firms demand uncertainty increases the capital-labor ratio. In manufacturing of chemical products (code35), manufacturing of non-metallic mineral products (code36), manufacturing of basic metal (code37) and manufacturing of machinery, equipment and metal instruments products (code38), however, firms negatively react against the demand uncertainty and rise in demand uncertainty decreases the labor intensity in these sub- sectors.
JEL Classification: D81, J21