Impact of industrialization on unemployment: empirical evidence for 110 countries using panel data during 1995-2017

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Published: Nov 9, 2020
Keywords:
Unemployment, Industrialization, Panel data, Cointegration, Causality

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Pablo Placencia
Universidad Nacional de Loja
Jimmy Rocano
Universidad Nacional de Loja
Danny Granda
Universidad Nacional de Loja

Abstract

The objective of this research is to evaluate the impact of industrialization on the unemployment rate. We use panel data with a sample of 110 countries during 1995-2017 classified as high-income (HIC), upper-middle-income (PIMA), lower-middle-income (PIMB), and low-income countries. The method used is the generalized least squares (GLS) method, which allows correcting optimally the problems of heteroskedasticity and serial auto-correlation that generally occur in models with panel data. The results show that the level of industrialization has a negative and statistically significant relationship with unemployment. In the MHICs, where industrialization has a positive but not significant relationship with the unemployment rate. The so-called middle-income trap can explain this fact in MHICs. The suggested public policy dictates that the industrialization process must be accompanied by public spending on education, health, and adequate infrastructure, allowing obtaining innovative human capital. This policy seeks to make human capital suitable for new trends in work and avoid the so-called middle-income trap in medium-sized economies.

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How to Cite
Placencia, P., Rocano, J., & Granda, D. (2020). Impact of industrialization on unemployment: empirical evidence for 110 countries using panel data during 1995-2017. Revista Económica, 8(1), 48–56. Retrieved from https://revistas.unl.edu.ec/index.php/economica/article/view/841
Issue
Vol. 8 No. 1 (2020): Revista Económica vol 8 (Enero-Junio 2020)
Section
RESEARCH ARTICLES
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