Democracy versus Dictatorship: An Empirical Investigation of Determinants of Unemployment

Muhammad Ilyas, Muhammad Asif Khan


This study identifies the main factors responsible for high unemployment rate in Pakistan during the period of 1977-2012 with particular interest in the role of political structure. Sample period has been divided into two regimes i.e. democratic and dictatorship using a dummy variable. Johansen co-integration test and error correction model have been applied to determine the factors of unemployment. The results reveal that investment growth reduces the unemployment rate both in short run and long run. Real GDP growth reduces the unemployment rate only in long run. Moreover, the study presents a surprising finding that unemployment rate in democratic regime remains significantly higher than that in dictatorship. The study also discusses some important policy implications and recommendations for future studies.


Economics, Unemployment, Democracy, Investment


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