Job Finding and Inflow to Unemployment: The Case of Iran

To analyze the labor market through search and matching theory, we need deep parameters, namely, the rate of inflow to the unemployment pool and job-finding rate. In other words, these rates are primary parameters of matching function; hence, estimating these parameters is an essential step for the use of search and matching theory in every economy. In this paper, we estimate these rates of Iran’s economy using the Simulated Method of Moments (SMM) as a baseline for future studies in this framework. We use the unemployment rate and the number of unemployed workers who were unemployed for less than one month. We find estimates of around 0.1 and 0.32 for the rate of inflow to unemployment and job-finding rate, respectively, which are lower than the amounts estimated for the United States and other developed countries. It is a sign of some labor market irregularities in Iran's economy. For example, it shows that the probability of experiencing long-term unemployment/employment by unemployed/employed ones is high because of lower job-finding and inflow to unemployment rates.