The Interactions between Minimum Wage and Inflation in Iran’s Economy

Document Type : Research Paper


1 University of Tehran, Faculty of Economics

2 Institute for Trade Studies and Research


The minimum wage determination is one of the most significant economic issues exerting effects on macroeconomic variables. This study provides an empirical model using VAR method to analyze the long run relationships and short run dynamisms of factors affect general price level (with emphasis on minimum wage) during the period of 1978-2010. To examine long run relationships we used Johansen-Juselius Co-Integration method and we also applied impulse response functions and variance decompositions to see how the short run dynamisms work. The results indicate that though minimum wage does not play a considerable role in explaining price level variations in Iran’s economy, price level is able to explain minimum wage variations properly.
JEL Classification: J31, J33 , E31


  • Receive Date: 26 August 2011
  • Revise Date: 17 September 2013
  • Accept Date: 23 April 2013
  • First Publish Date: 23 July 2013