Measuring the effect of neoclassical and institutional variables on employment rate in the OECD Developed countries

Subject Areas : Applied Economics

Mohammadreza Sharif Azadeh ¹ , Akbar Komijani ² , Teimour mohammadi ³ , Akbar Bagheri ⁴

1 - مسئول مکاتبات
2 - ندارد
3 - ندارد
4 - ندارد

Received: 2015-08-01 Accepted : 2015-08-01 Published : 2014-11-22

Keywords: Employment Rate, Neoclassical View, Institutional View, Good governance, Panel Data Approach, OECD Countries.&#x0D, &#x0D, JEL Classifi,

Abstract :

The purpose of this paper is to compare the effect of neoclassical and institutional variables (good governance indices) on the employment rate in the developed countries in the Economic Co-operation and Development (OECD) selected countries. The neoclassical and institutional variables are considered based on panel data econometric models for 24 of the OECD countries in the period of 1996 - 2011. The research model estimation includes seven equations (the first equation with neoclassical variables and the other equations with neoclassical variables and good governance indices separately) for developed countries of the OECD countries. The research model shows that neoclassical variables such as; the share of Gross Fixed Capital (GFC), the share of per capita real Final Consumption Expenditure (FCE) and the share of Foreign Direct Investment (FDI) flow as a percentage of real GDP are positive and significant in all seven estimated equations except in some sections for FCE and FDI. Also the effect severity of GFC is higher than FDI and FCE on employment rate. However, all six indicators of good governance (institutional variables) had a significant positive effect on the employment rate so that control of corruption index, voice of people and government accountability, government effectiveness, rule of law, regulatory quality and political stability, have had the first rank to sixth in terms of the impact severity on employment rate in these countries. Finally, practical suggestions are presented for improving the employment rate of the relevant countries according to the institutional approach (with an emphasis on good governance).