Economic Indicators and Labor Market Dynamics in South Asia's Emerging Economies: Through Random Effect Model

ABSTRACT:The article aims to test the relationship of key economic factors such as growth in GDP, inflation, FDI, interest rates, gross national income, and population increase with unemployment within eight emerging economies of South Asia (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka) for the period between 2001 and 2023. The empirical findings use a random-effects model in order to measure within-country panel heterogeneity and analyze the interaction between demographic and economic determinants that influence unemployment. This is with the intention of enabling deep insight into the region's labor market, concentrating on both time-series and cross-sectional heterogeneity. Unemployment is not significantly influenced by GDP growth in diverse economies. Inflation and interest rates have a high correlation with unemployment, while FDI reduces it but its applicability is unknown. Population growth interacts with other economic determinants. This study presents new evidence for the labor market behavior of the emerging economies in South Asia based on an assessment of the overall influence of economic and demographic variables on unemployment. The findings accentuate the imperatives of having a balanced economic policy that finds a balance between stable growth, low inflation rates, competitive interest rates, and targeted FDI policies. Moreover, the article emphasizes the necessity of workforce development interventions, particularly educational and upgrading of skills, to balance the upcoming labor supply with market needs. This overall integrated program is crucial in ensuring labor employment sustainability on a long-term scale in the region.