The gender gap in labor force participation (LFP) in Iran is much larger than most other countries, but it
has been declining. Also, the composition of women’s employment has been shifting towards
professional and entrepreneurial positions, especially in the private sector. Analyzing the forces behind
these patterns is important from a policy perspective and for predicting the future trends in the Iranian
labor market. Understanding the case of Iran has also implications for other economies, especially those
in the Middle East and North Africa, which have similar labor market conditions. Using a large sample
derived from Iran’s 2006 census and employing IV Probit and multinomial Logit models, we examine the
role of education and other individual and family characteristics in LFP and employment of Iranian men
and women aged 25-54. We find that while about 60 percent of the rise in female LFP rate between 1986
and 2006 can be attributed to the decline in fertility, the expansion of education accounts directly for
about a third of the rise. However, part of the fertility effect is also owed to female education, which has
played an important role in lowering the number of children ever born. Since fertility is unlikely to
decline further, female education could become the main driving force in the continued rise of women’s
participation in the labor market. We also find that women who join the labor market as a result of tertiary
education, especially at the graduate level, have a much higher chance of joining the private sector,
especially as employers and self-employed, than the average person in their cohort. Contrary to the
common perception, the association between education and public employment is much stronger for men
than for women. These findings imply that tertiary education, especially at the graduate level, may help
address the important policy challenges that Iran and other MENA countries in alleviating unemployment,
diversifying the economy, and empowering women.