Economic factors influencing the dynamics of unemployment in the G10 countries: empirical evidence from panel data modeling

Abstract

Purpose- The purpose of the study is to determine which macroeconomic factors and economic policy changes may affect unemployment in the G10 countries. Methodology- Panel least squares approach is employed to estimate the role of economic factors inflencing unemployment in the G10 countries. Findings- Our findings are in line with the Phillips curve approach, exposing the importance of expansionary macroeconomic policies triggering the aggregate demand along with maintaining economic and financial stability to reduce unemployment. Expansionary economic policies play a major role in providing an improvement in the labor market in the long run. An increase in the level of financial and economic integration and development may decrease unemployment in the G10 countries. An increase in the total value-added industry and education expenditures may lead to a decrease in the unemployment rates in these countries. Conclusion- We suggest that these countries should focus on sustaining their financial stability and development to improve the conditions of the labor market permanently. Liberalization of foreign trade, financial flows and market capitalization are crucial factors for the development of productivity of production factors, technology and organizational capacity in the G10 countries. Policy makers in the G10 countries should identify the channels through which technology, human capital, government spending, investment-specific, foreign and other shocks and taxes affect unemployment.