Iranian Journal of Economic Research

TESTING FOR CAPITAL - SKILL COMPLEMENTARITY HYPOTHESIS; AN EMPRICAL CASE STUDY OF IRAN

Authors

Jamshid Pazhooyan 1
Alireza Amini 2

1 Professor, Faculty of Economics, Allameh Tabatabai University

2 PhD student in Economics, Islamic Azad University

Abstract
Present research study aims to test the capital-skill complementarity hypothesis in the context of Iranian economy. Capital and skilled labor are postulated to be complementary. Skilled labors are defined as those labors with university education. To test this hypothesis, sector-wise demand functions for this class of labor have been estimated. These sectors are classified as: agriculture, industry, public, social, personal and housing services and other services. The econometric results indicate that capital and skilled labor appear to be complementary in all production and service sectors. As such, introduction of policies such as tax credit investment would result in cost reduction in terms of investment expenditures, and increase in demand for skilled labor force. Across the production sectors, skilled and unskilled labor has appeared as substitutes while in service complementary to each other but with fuel it appears as complementary.

  • Receive Date 14 May 2016
  • First Publish Date 14 May 2016

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