Conditional Unemployment Persistence: Rule of Law and Control of Corruption in Emerging Asia and Latin America
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Abstract
When a shock pushes unemployment up in emerging and developing economies, how long does it stay up, and do institutions shorten that memory? This study moves institutions from the level of unemployment to its memory. Its institutional memory framework joins hysteresis theory and New Institutional Economics, tests Rule of Law and Control of Corruption as separate moderators of persistence, and compares conditional persistence with the unity line that marks strict hysteresis. A dynamic panel of 25 Asian and Latin American economies over 2002-2024 is estimated with two step System GMM and stress tested on an identification map covering common year shocks, small sample inference, and slow moving governance data. Unemployment is highly persistent but decays slowly rather than permanently. Higher Control of Corruption is associated with weaker persistence and the sign never reverses, but statistical support disappears once common year shocks are removed and under several stricter assumptions: a steady sign with a fragile signal. Rule of Law points the same way without reliable precision, and the two dimensions cannot be told apart. The associations are not causal, and the public accountability channel behind corruption control remains theoretical. The study offers a persistence centred view of governance, a transparent standard for reporting fragile institutional evidence, and a practical message: plan for long lived shocks and test the integrity of recovery spending as a lever of resilience.
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This work is licensed under a Creative Commons Attribution 4.0 International License.
This work is licensed under a Creative Commons Attribution 4.0 International License.
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