Investigating the effect of industrial Aggregation on unemployment rates in provinces of Iran: A spatial econometric approach

One of the most important challenges of economic development in Iran is the heterogeneous spatial structure of regional employment rates. Determining the factors affecting the provincial unemployment and identifying the effects of spatial overflow between provinces- including industrial aggregation- can be considered in planning and policies in order to improve employment and reducing heterogeneous distribution of unemployment rates between regions. This measure becomes more important due to the distribution of economic activities with the changing conditions and also the wide differences in the distribution of unemployment rates in provinces of Iran. The main purpose of this study is to investigate the effect of industrial aggregation on unemployment rates in Iran provinces during the period 2007-2016 by using a combined spatial econometric approach. Findings of this study confirm the existence of spatial dependence in research data and show that industrial aggregation has a negative and significant effect on unemployment rates in Iran provinces. In other words, the industrial aggregation index has an inverse and negative effect on the unemployment rate in the province, itself, and also on its neighboring provinces.