Microfinance as a Catalyst for Change: Evaluating the Success of Iran's Rural Employment Program from 2017 to 2022

Document Type : Research Paper

Authors

1 Faculty of Economics. University of Tehran. Tehran. Iran

2 Department of Economics, Institute for Management and Planning Studies (IMPS), Tehran, Iran.

Abstract

The Iranian economy has long been challenged by elevated unemployment rates, a situation further complicated by enduring inflation, as illustrated by the Phillips curve, which highlights the inherent trade-off between these two economic variables.  The severity of unemployment, being underscored by public policy debates about employment objectives and inaccurately estimating job creation costs. Despite the implementation of numerous plans over decades to reduce the unemployment, including Rural Employment Plan (REP), their causal effects are rarely identified. The REP, a notable microfinance initiative, was launched from 2017 to 2022. In the present paper we use instrumented GMM, AB GMM, BB GMM, ARDL, and FE to examines the program's impact and present findings that challenge conventional academic expectations. Our results indicate that lagged logarithmic payments exert a consistently positive and significant effect, particularly in areas with higher employment rates, thereby suggesting enhanced benefits in regions with more robust economic activity. Furthermore, microfinance initiatives have proven instrumental in supporting impoverished areas by providing essential financial resources, enabling individuals to establish or maintain micro-enterprises, thus facilitating income generation and promoting local economic growth. Overall, one of our keys finding is that the cost of job creation in this plan is 214 million Tomans at a fixed price for year 2022, as we clearly demonstrate.

Keywords

Main Subjects

References

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Iranian Economic Review
Volume 29, Issue 3 - Serial Number 3
September 2025
Pages 1040-1067

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