Testing for Efficiency Wages in Iran

Iranian Economic Review, 15, 28, 53-71, 2012

23 Pages Posted: 27 Jul 2012 Last revised: 4 Oct 2013

See all articles by Saeed Moshiri

Saeed Moshiri

Saint Thomas More College University of Saskatcehwan

Farhad Maleki

affiliation not provided to SSRN

Date Written: July 26, 2012

Abstract

Efficiency wages is one of the recent new Keynesian theoreis providing a micro foundation to explain real rigidities in the labour market and long run involuntary unemployment. There are many empirical studies on efficiency wages in developed economies, but there is not a well documented evidence for this type of market imperfection in less developed economies. In this paper, we test for efficiency wages using the data from the Large Manufacturing Surveys in Iran for the period 1996-2005. In our model, we explain wage differentials in the manufacturing sector by a series of firm and employee characteristics, including ownership, size, industry type, education, skill, and gender. Our panel data estimation results indicate that state owned and large firms pay higher wages than private and smaller firms. They also show that education and skills have positive effects on wages, and that there is gender discrimination in the manufacturing section of the labor market. Finally, there are significant wage differentials in the manufacturing sector, even after controlling for all major variables, confirming the efficiency wages hypothesis in Iran.

Keywords: Efficiency wages, new Keynesian, large manufacturing survey, Iran

JEL Classification: J01, J16, J3, E24

Suggested Citation

Moshiri, Saeed and Maleki, Farhad, Testing for Efficiency Wages in Iran (July 26, 2012). Iranian Economic Review, 15, 28, 53-71, 2012, Available at SSRN: https://ssrn.com/abstract=2118149

Saeed Moshiri (Contact Author)

Saint Thomas More College University of Saskatcehwan ( email )

1437 College Dr
Saskatoon, Saskatchewan S7N 0W6
Canada

Farhad Maleki

affiliation not provided to SSRN ( email )

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