Causality nexus between oil production, industries energy consumption and unemployment in Iran

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.