Impact of trade openness, human capital, public expenditure and institutional performance on unemployment: evidence from OIC countries
International Journal of Manpower
ISSN: 0143-7720
Article publication date: 20 October 2021
Issue publication date: 10 August 2022
Abstract
Purpose
This study examines the impact of trade openness, human capital, public expenditure and institutional performance on unemployment in various income groups of Organization of Islamic Cooperation (OIC) countries.
Design/methodology/approach
Traditional panel data methodologies neglect the issue of cross-sectional dependence and provide ambiguous outcomes. A novel approach, “dynamic common correlated effects (DCCE)”, is utilized in this study to tackle with aforementioned issue. Pooled mean group (PMG) estimation is also applied to verify the robustness of the findings.
Findings
The long-run estimates show that trade openness has a significant and negative relationship with the unemployment rate in overall and lower-income OIC economies and a positive correlation with unemployment in higher-income OIC countries. Public expenditure is negatively and significantly correlated with unemployment in higher-income and overall OIC economies. Moreover, human capital reduces unemployment in higher-income and overall OIC countries while increases unemployment in lower-income OIC economies.
Practical implications
The research tends to endorse the argument for continuous trade openness policy along with efficient use of public expenditure and improved institutional performance to reduce unemployment in OIC countries.
Originality/value
The DCCE approach in this research considers heterogeneity and cross-sectional dependence between cross-sectional units and thus gives robust outcomes.
Keywords
Acknowledgements
Muhammad Saeed Meo acknowledges that this paper has been supported by the RUDN University Strategic Leadership Program. Sajid Ali acknowledges that a significant portion of this paper is extracted from his PhD thesis in Economics from School of Business and Economics, Universiti Putra, Malaysia.
Compliance with ethical standards:
Human and animal rights: No human or animals were harmed to do this research.
Conflict of interest: On behalf of all authors, the corresponding author states that there is no conflict of interest associated with this manuscript.
Citation
Ali, S., Yusop, Z., Kaliappan, S.R., Chin, L. and Meo, M.S. (2022), "Impact of trade openness, human capital, public expenditure and institutional performance on unemployment: evidence from OIC countries", International Journal of Manpower, Vol. 43 No. 5, pp. 1108-1125. https://doi.org/10.1108/IJM-10-2020-0488
Publisher
:Emerald Publishing Limited
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