Investigating the Effect of Governance on Unemployment in Selected OPEC member Countries

Document Type : Original Article

Authors

1 Department of Economics, Faculty of Economics and Management, Shiraz branch Islamic Azad University Shiraz Iran

2 Department of Economics, Faculty of Economics and Management, Shiraz Branch Islamic Azad University, Shiraz Iran

3 Department of Economics, Faculty of Economics and Management Shiraz Branch Islamic Azad University, Shiraz, Iran

Abstract

Reduction of unemployment as one of the key indicators of economic evaluation of countries has always been the focus of attention of economists and politicians of countries. In recent decades and with the expansion of the new institutionalism approach, good governance and its components have been considered as one of the important factors affecting the development strategy of countries and unemployment control. Therefore, the main goal of this study is to investigate the effect of good governance on unemployment in selected oil exporting countries. In this regard; The effect of good governance indicators on unemployment in selected OPEC member countries was investigated by using the Modified Ordinary Least Squares (FMOLS) method. The data used in this research are annual data extracted from reliable scientific organizations and databases for the period from 2002 to 2021. Considering the strong correlation between good governance indicators and in order to prevent problems caused by multiple collinearity, by using the principal component analysis (PCA) method, the main governance components were extracted and the first principal component ( PC〗_1) was included in the model as a proxy for different dimensions of governance. The results of the estimation of the model showed that the first main component of governance has a negative and significant effect on unemployment in this group of countries, which means that improving the governance situation can provide the basis for reducing unemployment in OPEC member countries. Also, the interest rate, as one of the macro variables affecting unemployment entered in the model, has a positive and significant effect on unemployment.

Keywords: good governance, unemployment, principal component analysis (PCA), modified ordinary least squares (FMOLS), macroeconomics

JEL Classification:

C23, M48, E24, H11, J64

Keywords

Main Subjects

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Public Sector Economics Studies
Volume 3, Issue 2
July 2024
Pages 217-246

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History

  • Receive Date: 23 February 2024
  • Revise Date: 08 May 2024
  • Accept Date: 12 May 2024

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