Title : Financial inclusion, climate vulnerability, and unemployment: An econometric panel analysis of the MENA region (2000–2025)
Abstract:
This study investigates the relationship between climate vulnerability, financial inclusion, and unemployment in the Middle East and North Africa (MENA) region over the period 2000–2025. The analysis is motivated by the region’s simultaneous exposure to increasing climate-related risks, persistent labor-market weaknesses, and uneven access to formal financial services. While previous research has established that climate shocks can reduce productivity, investment, and labor demand, and that financial inclusion can enhance household and firm resilience, limited empirical attention has been devoted to whether financial inclusion can moderate the adverse effects of climate vulnerability on unemployment at the macroeconomic level.
Using a country-level panel data framework, the study examines three related hypotheses. First, greater climate vulnerability is expected to increase unemployment by weakening economic productivity, disrupting production, and reducing labor demand. Second, financial inclusion is expected to contribute to lower unemployment by facilitating entrepreneurship, investment, liquidity management, and access to productive financial resources. Third, and most importantly, the study tests whether financial inclusion weakens the positive relationship between climate vulnerability and unemployment. The empirical specification incorporates an interaction term between climate vulnerability and financial inclusion, while controlling for GDP growth, trade openness, human capital, and agricultural dependence. Country-specific and time-specific effects are included to account for unobserved heterogeneity and common macroeconomic shocks.
The study contributes to the literature by moving beyond the predominant household-level focus on climate resilience and poverty and examining the implications of financial inclusion for labor-market stability. It also provides new evidence for the MENA region, where high climate exposure, structural unemployment, financial constraints, and heterogeneous institutional and economic structures create a particularly relevant setting for examining this nexus. The findings are expected to provide evidence on whether expanding inclusive financial systems can serve not only as an instrument of financial development but also as a potential mechanism for strengthening labor-market resilience to climate-related shocks. The results have implications for financial inclusion policies, climate adaptation strategies, employment policies, and sustainable development in climate-vulnerable economies.
Keywords: Financial Inclusion; Climate Vulnerability; Unemployment; MENA Region; Climate Resilience; Labor Markets; Panel Data; Sustainable Development.
