Financial system sophistication and unemployment in industrial countries

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By using data on 21 industrial countries from 1984 to 2006 and a large number of controls, this paper studies the unemployment effects of one major characteristic of the financial system: its level of sophistication, that is, the variety of financial institutions and instruments available to the economy. The paper finds that a higher level of sophistication is likely to reduce unemployment among the total labour force as well as among high-skilled workers. The magnitude of both effects appears to be modest. By contrast, financial system sophistication does not appear to affect unemployment among low-skilled workers.
Original languageEnglish
Pages (from-to)319-338
JournalInternational Journal of Finance & Economics
Issue number4
Early online date9 Jul 2012
Publication statusPublished - Oct 2013

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