Abstract
The study explores the causality between oil production, industrial production, energy consumption, and unemployment in Iran. We use time-series data, spanning the period 1990–2017 and apply VECM method for the data analysis and our findings suggest that crude oil production significantly causes unemployment through industrial production and energy consumption channel both in the short and long run, while energy consumption and industrial production affect unemployment in the short run only. Furthermore, energy consumption also determines industrial production showing energy as a supplement to the industries. The oil production in Iran substantially contributes to the country’s exports and main energy main input to the local industries. Industrial production increases energy consumption and reduces unemployment in the country. Therefore, the government should formulate appropriate policies, which take into account the fact, that changes in oil production have both short-run as well as long-term effects on employment in the country.
Highlights
Natural resource abundance has significant contributed country’s economic development, it provides employment, alleviate poverty, promoting local businesses, income, and economic growth (Aragon and Rud, 2013; Brunnschweiler and Bulte, 2008; Byakagaba et al, 2019; Dashwood, 2012; Mawejje and Society, 2019)
The development of industries is associated with energy consumption, which directly depends on available oil resources, especially if country energy depends on fossil fuels
Industrial production could play a pivotal role in reducing unemployment in the economy, industries use energy as an input that heavily relies on the different sources of energy resources including oil, coal, and renewable energy options
Summary
Natural resource abundance has significant contributed country’s economic development, it provides employment, alleviate poverty, promoting local businesses, income, and economic growth (Aragon and Rud, 2013; Brunnschweiler and Bulte, 2008; Byakagaba et al, 2019; Dashwood, 2012; Mawejje and Society, 2019). Oil resources may increase energy production that further use in the industrial sector which provides jobs opportunity in the country. Iran provides subsidies to the household and industries, approximately $69 billion of subsidies allocated for various types of energy consumption including oil during 2018 ($26.6 billion), which significantly improved the local industries and raised the employment level in the country. Industrial production could play a pivotal role in reducing unemployment in the economy, industries use energy as an input that heavily relies on the different sources of energy resources including oil, coal, and renewable energy options. Industrial production could improve the country’s production as well as increase employment opportunities in the country which resultantly reduces unemployment. The industrial productivity increase which results from the higher energy consumption leads to reduces unemployment(Brown et al, 2021). The rest of the paper is organized as follows: the section presents a literature review, the Oil production, energy, industries and unemployment in Iran section contains the stylized facts, the Methodology section and the Results and discussion section related to the results of the study and final section contains the conclusion of the study
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