Analyzing and Estimating Labor Demand Function in Kermanshah Province

Perpetual growth and sustainable economic development necessitates optimal use production resources. Meanwhile, one of the most pivotal and critical resources of any country’s growth and development are human resources. Human resources play a dual role in economic planning as both the factor and goal of development. As the issues related to human resources have both economic and non-economic aspects, they are considered outstanding in every country’s macroeconomic planning in a way that most important concern of macroeconomic planners is unemployment. This paper tries to analyze and estimate labor demand function in Kermanshah province. It also evaluates the impacts of variables influencing labor demand function in the province within 1981-2009 through using cointegration and error correction techniques. The results of the study indicate that labor demand function in the province has positive relationship with the province’s value added in a way that in the long run with one percent of increase in the value added, the labor demand increases by 0.32 percent. Labor demand function has negative relationship with the labor wage in a way that with 1 percent of increase in the wages, labor demand decreases by 0.26 percent. In the long-run and short-run models, the effect of these indicators is significant and corresponding to the expected signs of theoretical principles.