Determinants of Unemployment in Selected Developing Countries: A Panel Data Analysis

Abstract

This research gives a new glimpse on determinants of unemployment in developing countries. Unemployment is not only a burning issue in developing countries but also in developed countries, but in this study, the case is related to developing countries. For this purpose data of ten selected developing countries has been taken for the period of 2000 to 2019 from the World Bank. Stationarity has been checked through the Augmented Dickey-Fuller (ADF) test and the result showed that all variables were stationary at 1st difference except the variable of inflation. The Generalized Method of Moments (GMM) model has been applied and results show that all variables are statistically significant. GDP, inflation, remittances, exchange rate, and expenditure on education has a negative impact on unemployment while population and external debt has a positive impact on unemployment. Policy recommendations are that if developing economies want to reduce unemployment they have to control population, remove deficit in the balance of payment, control the inflation rate, raise their GDP, earn the exchange rate due to increase in exports, and gain the foreign remittance and have to allocate the more budget on expenditure on education. In light of these recommendations, all economies can achieve economic efficiency and economic development.