Impact of digital financial inclusion and technological innovation on unemployment

PurposeThis research explores the relationship between digital financial inclusion, technological innovation and unemployment. This study aims to examine how progress in digital finance and technology influences unemployment rates.Design/methodology/approachDrawing on data from 101 countries covering the years 2004–2020, the study uses several econometric techniques. These include the two-step system generalized method of moments (GMM), two-stage least squares (2SLS), propensity score matching (PSM) and entropy balancing to address concerns related to endogeneity. To ensure the robustness of the results, the analysis also incorporates alternative indicators and conducts subsample analysis for both developed and developing nations.FindingsThe main findings reveal that both digital financial inclusion and technological innovation are significantly associated with lower unemployment rates. These negative effects remain consistent across different models and data subgroups, highlighting the robustness of the results. The use of other methods such as the two-step system GMM, 2SLS, PSM and entropy balancing strengthens the robustness of the conclusions drawn.Originality/valueThis study offers fresh perspectives on how digital finance and technological advancements can serve as tools to combat unemployment. By applying a range of analytical approaches and examining multiple proxy measures, the research delivers a well-rounded analysis of how digital and technological developments relate to labor market outcomes.