The Effect of Political Risk on Unemployment and Entrepreneurship: Evidence from Selected Countries

Document Type : Original Article

Authors
Alireza Afrasiabi 1
shahrzad ahmadi 2
1 Department of Theoretical Economics, Faculty of Economics, Allameh Tabatabaei University, Tehran, Iran.
2 Department of Accounting, Gorgan Branch, Islamic Azad University, Gorgan, Iran.
10.22034/jmek.2025.461009.1136
Abstract
In today's era, high economic growth is recognized as a crucial tool for achieving sustainable development in countries. In this regard, political instability acts as a major obstacle to the economic development and growth of societies. The unemployment rate is a fundamental issue in national economies, where increasing employment and reducing unemployment are key indicators of a nation's development. Consequently, entrepreneurial activities and business formation are essential for employment growth and unemployment reduction. The present study aims to investigate the impact of political risk on the unemployment rate and entrepreneurship. This research examines the effect of political risk on unemployment and entrepreneurship rates in 30 developed and developing countries over the period from 2010 to 2022, utilizing the panel data method and Eviews software. The results indicate that political risk has a significant positive effect on the unemployment rate and a significant negative effect on entrepreneurship in both studied groups. Specifically, an increase in political risk leads to a higher unemployment rate in the studied countries, with a more pronounced impact in developing countries compared to developed ones. Furthermore, rising political risk results in a decreased entrepreneurship rate across both developed and developing nations. These findings highlight that a stable political and institutional environment is a fundamental prerequisite for the success of economic policies. Therefore, mitigating political risk and fostering stability can create a conducive environment for attracting investors, promoting entrepreneurship, and ultimately reducing the unemployment rate.
Keywords
Political Risk
Unemployment Rate
Entrepreneurship
Developed Countries
Subjects
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  • Receive Date 04 February 2026
  • Revise Date 16 May 2026
  • Accept Date 18 June 2026