Factors affecting level of unemployment in South Asia

Abstract

PurposeThis study aims to investigate the short-run and long-run relationship between economic variables and the unemployment rate in South Asian countries.Design/methodology/approachA panel Vector Error Correction (VECM) model is used to establish the long-run and the short-run relationship between unemployment rate and selected economic variables. Data were collected from WDI, WGI and FDSD for the year's 1994–2016.FindingsThe finding of the study showed a negative and significant relationship at the 5% level of significance among governance, internet users, mobile cellular subscriptions, fixed broadband subscriptions and human capital with an unemployment rate of South Asian economies. On the other hand, financial activity (credit) and population growth have a positive and significant relationship with the unemployment rate.Research limitations/implicationsIn the light of our findings clear that employment problems can only be created if the government does not put in place adequate measures to control the population and allocate resources equitably, giving a sense of belonging to all citizens. Therefore, to provide the controlled population with the necessary employment opportunities, it is necessary to allocate resources efficiently and to launch projects aimed at creating jobs.Practical implicationsTransparency or merit is the basis of good governance and the very first step to achieving the goal of good governance is to fight against corruption. It provides a complete justification for providing good quality management records, financial controlling and managerial systems.Originality/valueThe connections between governance and unemployment are complex and need to be studied in a detailed manner. There is the absence of literature that strongly interfaces good governance to unemployment; the fundamental work in this regard is Farid (2015). They locate a solid relationship between good governance and improving external debt situation by in Pakistan a time series analysis. But there is no research in the context of South Asian countries between governance and unemployment.