Public expenditures, which reveal the size of the public sector, are among the most important tools of fiscal policy, and they have different effects on many macroeconomic variables depending on the state of the economy. Unemployment is usually among the most significant problems of developing countries and is a phenomenon with many socio-economic impacts. In this regard, the size of the public sector and the unemployment rate are among the important macroeconomic indicators. Abrams was the first person who empirically examined the relationship between these variables. Abrams (1999) examined the relationship between the size of the public sector and the unemployment rate in 20 OECD countries and concluded that there was a positive relationship between these two variables and that the size of the public sector increased unemployment. After the said study, this positive relationship between the size of the public sector and unemployment began to be expressed in the literature as the Abrams curve hypothesis.

The purpose of the current study is to examine the relationship between the size of the public sector and unemployment for BRICS countries consisting of developing economies and MIST countries consisting of newly emerging economies with annual data for the period of 1991-2021 and to reveal whether the Abrams curve hypothesis is valid according to the results. In this study in which panel data analysis was used, the unemployment rate was used as the dependent variable, whereas the share of public expenditures in GDP representing the size of the public sector was used as the independent variable, and GDP representing the economic growth rate was used as the control variable. Within the scope of the panel data analysis, cross-sectional dependence, homogeneity, and stationarity tests were conducted for both the variables and the established model. Afterward, the established model was analyzed with cointegration and causality tests. The analyses showed that the Abrams curve hypothesis was invalid in BRICS and MIST countries.