Regulatory Quality and Employment Generation Empirical Evidence from selected Developing Economies of Asia

Abstract

Theory of economic regulation gained importance in economics literature in the era of 1990s. Market failure caused by market imperfections has legitimized government intervention and regulation in the economic affairs of state. But positive response to regulation in developed countries and failure of regulatory institutions in developing countries have created doubts about the role of regulation in developing countries. This study is an effort to explore relation between regulatory quality and employment generation in 6 developing economies of Asia namely China, Indonesia, Malaysia, Pakistan, Philippines and Thailand, using data from 1996 to 2011. Panel Model has been assessed by using fixed effects technique and Generalized Method of Moments (GMM). We have found a strong positive effect of regulatory quality on level of employment in selected economies. We suggest enhancing quality of regulatory institutions to tackle the issue of wide range unemployment in developing economies like of Asia.

Key Words: Regulatory Quality, Employment, Governance, Fixed Effects, Developing Economies, Institutions