Dynamic Demand Function for the Iranian Agricultural Labour

Agriculture is an important economy sectors in Iran which influenced by factors of production such as labour, land and capital. The agricultural labour is affected by supply and demand for labour. However this sector is basseted with the labour surplus situation as indicated by the high labour/land ratio. The objective of this study is to examine a dynamic model of labour demand with consideration of Disequilibrium Costs (DC) and Adjustment Costs (AC) based on partial adjustment method. The dynamic demand function for the agricultural labour was estimated from 1966/67 to 2000/01. The impacts of the agricultural production, agricultural wage rate, agricultural capital price and 8 years war effect on the agricultural labour were generally analyzed. The overall results suggested that employer in the agricultural sector did not adjust the optimal level to the actual level of employment, because of high AC with respect to DC. The speed of adjustment (1/λ=22 years) was too slow, relation between capital and labour was substitution in the production process, and war had negative effect on the agricultural labour demand. Hence policy makers can reduce the price of capital (offer low interest rate in the agricultural sector) to substitute capital instead of labour in the production process and reduce AC in order to diminish gap between optimal and actual employment.

کلیدواژه ها:

Dynamic Labour Demand ، Agricultural Labour ، Adjustment Cost ، Disequilibrium Cost ، Adjustment Coefficient