The Impact of Institutional Quality on Unemployment for the Selected South Asian Countries
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Date
2019
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UMT, Lahore
Abstract
The main objective of the thesis is to empirically investigate the impact of institutional quality indicator (rule of law, control for corruption, government effectiveness, voice and accountability, regularity quality) on unemployment rate. The panel data runs from 1996-2017 for the Asian countries like India, Nepal, Pakistan and Bangladesh. We employ Pooled Mean Group (PMG) estimation for the analysis introduced by Pesaran, Shin and Smith (2001). According to the empirical findings, in the long run regularity quality is highly significant and has a negative impact on unemployment in the all the eight models which conclude that the role of the regularity quality in decreasing unemployment is more robust then the other proxies of institutional quality used in the thesis in case of selected Asian countries. Moreover, our results show that voice and accountability and government expenditure also decrease unemployment rate while control for corruption and rule of law enhance unemployment rate but both the proxies are statistically insignificant in model 8. In the short run, the −1 values for all the proposed models are statistically significant and entered with negative signs indicating that that if any macroeconomic shock hits in selected Asian countries then the eight proposed models have power to restore to long run equilibrium.