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Submitted
March 18, 2024
Accepted
August 16, 2024
Published
October 29, 2024
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Abstract

Purpose ― Most global economies are dealing with the issue of skill bias. In developing and underdeveloped countries, skill bias poses a problem by preventing the educated from participating in the economy's production function, especially in the long run. This paper expands on the skill-wage relationship and investigates this issue in the case of Iran from 1981 to 2021.
Methods- Applying Impulse Responses from VECM and the Structural VAR model separates the relationship between skill and wage into short- and long-term effects. The structural wage model was estimated using the structural vector auto-regression model.
Findings ― The results show that skill played a significant role in wage determination only for three periods in the short run, and the effect was neutral in the long run. This means that skill accumulation through advancement in graduate and postgraduate study is unlikely to increase wages in the long run.
Implication ― According to the findings, skill bias implies that education attainment in the Iranian labour market can only improve wages to a minimum extent. This also proves that factors other than education determine wage growth in the economy.
Originality ― The skill-wage relationship has not been a focus of studies in education outcome fields. Moreover, in the case of Iran, this investigation is novel, and there is a lack of studies on the relationship between compensation and skill.

Keywords

skill bias long-run wage model human capital bargaining

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Copyright (c) 2024 Mehdi Mohebi, Akbar Komijani

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Economic Journal of Emerging Markets by Center for Economic Studies, Universitas Islam Indonesia is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Author Biography

Akbar Komijani, Faculty of Economics, University of Tehran, Tehran, Iran

A Professor at the Faculty of Economics, University of Tehran, Tehran, Iran

How to Cite
Mohebi, M., & Komijani, A. (2024). Skill bias in the labour market: Evidence from Iran. Economic Journal of Emerging Markets, 16(2), 136–150. https://doi.org/10.20885/ejem.vol16.iss2.art4
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