Trade openness may create new jobs or reduce the existing ones. Hence, the effects of trade openness on unemployment rate are obvious but the nature and strength of the effects are found to be different in literature. In this study, we aim to unveil the effects of trade openness on unemployment rate in 12 Least Developed Countries (LDCs) for a period of 1995 to 2016 by following the Least Squares Dummy Variable Corrected (LSDVC) panel estimation method which corrects the probable bias of using

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... mall cross-sectional units. Some economic indicators like inflation, real interest rate, government stability and two labor market indicators namely labor market regulation and labor freedom index are also taken into account. Trade openness is found to increase the unemployment rate which prevails true when alternative measures are used. Also, previous year's unemployment rate increases current unemployment rate. Inflation and real interest rate are found to have insignificant impacts. But labor market regulation and labor freedom significantly influence unemployment rate while the former increases and the later decreases the rate of unemployment. Moreover, the interactive effects of trade openness and labor freedom imply that trade openness may reduce the unemployment rate at higher level of labor freedom. Hence, LDCs should adopt more flexible labor market regulations and improved labor freedom to get the beneficial effects of trade openness on unemployment.