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FinTech and unemployment: New evidence on the role of labor market regulation

Author

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  • Daud, Siti Nurazira Mohd
  • Ahmad, Abd Halim
  • Trinugroho, Irwan
  • Rusgianto, Sulistya
  • Ridhwan, Masagus M.

Abstract

FinTech has changed the landscape of financial markets, with product and process innovation improving productivity and efficiency. However, concerns over technology replacing human roles have led to discussions in finding tolerance and formulating effective policy responses, particularly regarding labor market regulations. This study investigates the impact of FinTech and labor market regulation on unemployment across 65 countries from 2008 to 2020. This study constructs the FinTech indicator by employing an innovative web browsing technology method covering four dimensions: artificial intelligence, blockchain-related, cloud technology, and data technology. The System GMM (Generalized Method of Moments) estimation method was employed to examine the impact of FinTech and labor market regulation on unemployment, which accounts for endogeneity. The evidence indicates that FinTech has contributed to labor-creating effects, implying that it creates employment opportunities. Labor market regulation shapes employment dynamics, but certain aspects require stringent regulation while others benefit from deregulation. Our results are robust to alternative estimation methods, proxies, and sub-sample approaches. Our results highlight the importance of a regulatory framework combining flexibility with some regulations in specific sectors, and focused on safeguarding consumers and ensuring systemic stability. This balanced approach would foster innovation and skill development within the FinTech sector. Moreover, it will help harness the potential of FinTech to create employment opportunities, while effectively managing risks and facilitating a fair and inclusive transition for workers in the digital economy.

Suggested Citation

  • Daud, Siti Nurazira Mohd & Ahmad, Abd Halim & Trinugroho, Irwan & Rusgianto, Sulistya & Ridhwan, Masagus M., 2025. "FinTech and unemployment: New evidence on the role of labor market regulation," Research in International Business and Finance, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:riibaf:v:79:y:2025:i:c:s0275531925003162
    DOI: 10.1016/j.ribaf.2025.103060
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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