Determinants of Unemployment Rates in Upper Middle Income Asian Countries

Abstract

This study aims to determine the determinants of unemployment rates in upper-middle-income Asian countries from 2000 to 2023. This study uses the Autoregressive Distributed Lag (ARDL) method. The analysis results show that in the long run, economic growth, foreign direct investment, income openness, and government consumption expenditure have a significant negative effect on unemployment. Conversely, urban population growth has a significant positive effect on unemployment. Meanwhile, in the short run, only urban population growth can have a significant negative impact on unemployment. Meanwhile, the one-year lag coefficient of foreign investment is proven to be positive and significant on unemployment. These findings imply that poverty reduction is primarily determined by long-term structural policies that encourage economic growth, foreign direct investment, trade openness, and the effectiveness of government spending. The impact of urbanization on increasing poverty emphasizes the need for integrated urban planning with formal job creation. Meanwhile, the weak short-term effect reflects the delay in labor market adjustment that requires supporting policies during the transition phase.