Zakat is one of the pillars in Islam. It is the portion of a man’s wealth designed for the poor.  It is deemed to empower eight specific groups in society, i.e. the poor, the needy, those in debt, those in the wayfarer, the sympathizers, those in the cause of God, those in bondage and the fund administrators. The main goal of Zakat is to alleviate poverty through assistance to the poor and the needy and to achieve socioeconomic justice by closing the gap between the poor and the rich in the society. This paper focuses on the effect of Zakat on employment namely the effect of subsidising education of individuals who fulfil the criteria to be recipients of Zakat, thought taxing rich workers who are above Nisab, on employment. We also compare this Islamic policy (zakat) with the conventional one (namely subsidising education of all individuals by taxing their wages) used by most of countries and evaluates the effectiveness of both fiscal systems in reducing unemployment. We develop a theoretical neoclassic model showing that the conventional fiscal policy does not affect employment, which may justify the persistence of high unemployment rates observed in many developed and developing countries despite the massive public resources devoted to the education sector in these countries. The model proves that the Islamic fiscal policy will reduce unemployment.

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We show in this paper that, depending on the initial distribution of material wealth and that of individuals' abilities, economies converge in the long run towards different proportions of the skilled workforce and different levels of average wealth. We also show that the growth process raises net economic mobility, the long-run proportion of the skilled population and the long-run levels of wealth held by both rich and poor dynasties. Unless the income tax rate is too high, the increase in total public funds is associated, in the long run, with higher net mobility, a larger fraction of the skilled workers and higher levels of wealth of all the dynasties. In addition, the reallocation of public expenditures from basic to advanced education can result in lower mobility, a lower long-run size of the skilled workforce, and a lower long-run level of wealth held by rich dynasties, if the transfer of resources comes at the expense of excessively lowering the quality of education at the basic schooling level.

This article is motivated by the recent debate raised on Okun’s Law regarding the divergence of the magnitude of Okun’s coefficient across countries and time horizons, its asymmetry and non-linearity, and the methodological issues associated with the estimate of this law. We tested the proposition that institutional quality—as measured by governance indicators—can explain this divergence and non-linearity. We estimated an augmented version of Okun’s Law showing the non-linear responsiveness of unemployment to fluctuations in GDP in the presence of institutional quality in a sample of 88 developing and emerging countries over the 1985–2019 period. Estimates are run using the 3sls regressor. We found evidence confirming that the responsiveness of unemployment to changes in output is all the more remarkable in countries with stronger institutions. We show that improving the institutional environment—as proxied by Government Effectiveness (GE), Control of Corruption (CC), Regulatory Quality (RQ), the Rule of Law (RL), and Voice and Accountability (VA)—is as important as increased economic growth in the strategy of reducing unemployment and reaching full employment in these countries, which is one of the 17 Sustainable Development Goals (SDGs) issued by the United Nations.