Is Economic Growth Working for Jobs? An Investigation of the Employment Generating Capacity of the Nigerian Economy
top of page
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute

Economics and Business

Quarterly Reviews

ISSN 2775-9237 (Online)

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
crossref
doi
open access

Published: 19 October 2020

Is Economic Growth Working for Jobs? An Investigation of the Employment Generating Capacity of the Nigerian Economy

Olumuyiwa Olamade

Caleb University Imota, Nigeria

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, management journal

Download Full-Text Pdf

doi

10.31014/aior.1992.03.04.285

Pages: 1345-1356

Keywords: Economic Growth, Employment, Jobless Growth, Population, Okun’s Law, Nigeria

Abstract

Nigeria has been best with the incidence of concurrent unemployment and a good run of economic growth thus calling to question the efficacy of economic growth to create jobs in the country. In this paper, we examine first whether there exists any relationship between economic growth and employment in the manner espoused by Okun’s law and then interpret the coefficient of the relationship as indicative of the capacity of the economy to translate growth into employment. Due to the unreliability of unemployment data in many developing countries we use the growth rate of employment as the dependent variable and thus expect to find a positive relationship with economic growth. A second model was specified with the growth rate of employment-to-population ratio as the dependent variable. Data were extracted from World Development Indicators and Penn’s World Table for 1961 to 2017. All the variables were level stationary from two different tests of their statistical properties. We thus estimate the Ordinary Least Squares for the short-run coefficients and explore the robustness of the ARDL to different orders of integration for the long-run form. Both establish the application of Okun’s law to Nigeria with the employment elasticity of GDP growth too small to generate discernible growth in employment. We estimated an average GDP growth of 16.22% over the long-run for the economy to keep a steady growth in employment.

References

  1. Adeyeye, P., Odeleye, A., & Aluko, O. (2018), Investigating Okun's Law in Nigeria through the Dynamic Model, Journal of Economics and Behavioral Studies, AMH International, 9(6): 39-46.

  2. Akanbi, O. (2015). Impact of Macroeconomic Variables on Nigerian Unemployment using the Vector Autoregressive Approach. International Journal of Research in Humanities and Social Studies, 2(2), 65-76.

  3. An, Z., Ghazi, t., & Priesto, N. G. (2017) Growth and jobs in developing countries: Trends and cycles. IMF Working Paper WP/17/257.

  4. Baah‐Boateng, W. (2013). Determinants of Unemployment in Ghana. African Development Review, 25(4), 385-399.

  5. Baah‐Boateng, W. (2016). Economic growth and employment generation nexus: Insight from Ghana. WP 16. The International Center for Development and Decent Work,

  6. Babalola, S. J., Saka, O. J., & Adenuga, I. A. (2013). The Validity of Okun's Law in Nigeria: A Difference Model Approach. Asian Economic and Financial Review, 3(12), 1598-1608.

  7. Bakker, B & Zeng, Li (2014). Reducing the employment impact of corporate balance sheet repair. In Jobs and Growth: Supporting the European Recovery 2014. Eds, Spilimbergo, A; Berger, H; Bas, B, & Schindler, M., pp 39–66. Washington, DC: International Monetary Fund.

  8. Ball, L., Jalles, J., & Loungani, P. (2014).  Do forecasters believe in Okun’s Law?: An assessment of unemployment and output forecasts. IMF Working Paper WP/14/24. Research Department.

  9. Ball, L., Leigh, D., & Loungani, P. (2017).  Okun’s Law: Fit at 50? Journal of Money, Credit and Banking. 49(7).

  10. Ball, L., Furceri, D., Leigh, D., & Loungani, P. (2019). Does one law fit all? Cross-Country evidence on Okun’s Law, Open Economies Review, Springer, 30(5): 841-874, November.

  11. Bankole, A., & Fatai, B. (2013). Empirical Test of Okun’s Law in Nigeria. International Journal of Economic Practices and Theories, 3(3), 227-231

  12. Bartolucci, F., Choudhry, M., Marelli, E. and Signorelli, M. (2018), GDP Dynamics and Unemployment Changes in Developed and Developing Countries. Applied Economics, 50(31), 3338-3356.

  13. Central Bank of Nigeria (CB) (2006). Economic growth drivers and financing challenges. https://www.cbn.gov.ng/out/speeches/2006/govadd%2018-1-06.pdf

  14. Dixon, R., L, G. C., & van Ours, J. C. (2016) Revisiting Okun’s relationship. Discussion Paper No. 9815. The Institute for the Study of Labour (IZA), Bonn.

  15. Elshamy, H. (2013). Okun’s law and its validity in Egypt. Journal of Emerging Issues in Economics, Finance and Banking (ISSN: 2306 367X), 1(2), 67-74.

  16. Farole, T., Ferro, E., & Gutierrez, V. (2017), Job creation in the private sector: An exploratory assessment of patterns and determinants at macro, sector, and firm levels. Jobs Working Paper No. 5. World Bank.

  17. Freeman, D. G. (2001). Panel tests of Okun’s law for ten industrial economies. Economic Inquiry, 39(4): 511-23.

  18. Furceri, D. (2012). Unemployment and Labor Market Issues in Algeria. WP 12/99. International Monetary Fund.

  19. Garavan, S. (2017), Okun’s Law: An empirical investigation into Eurozone growth and unemployment, The Student Economic Review, Vol. XXXI: 159-168. https://www.tcd.ie/Economics/assets/pdf/SER/2017/Front%20Matter.pdf

  20. Geldenhuys, J., & Marinkov, M. (2007). Robust Estimates of Okun’s Coefficient for South Africa. University of the Free State, WP 55.

  21. ILO (2019), Employment-rich Economic Growth. Retrieved from https://www.ilo.org/global/topics/dw4sd/themes/employment-rich/lang--en/index.htm

  22. IMF (2010), Unemployment dynamics during recessions and recoveries: Okun’s law and beyond. In Rebalancing Growth, World Economic Outlook, April 2010: pp. 69–107. Washington, DC: International Monetary Fund.

  23. Kargi, B. (2016). Okun’s law and long term co-integration analysis for OECD countries (1987 – 2012), Emerging Markets Journal, 6(1): 39-46.

  24. Karim, El Aynaou & Ibourk Aomar, I. (2016), Policy lessons from Okun’s Law for African Countries. IMF Seminar on Global Labour Market. Retrieved from https://www.imf.org/external/np/seminars/eng/2016/GlobalLaborMarkets/pdf/Aynaoui_

  25. Kitov, I. O. & Kitov, O. I. (2012). Modelling unemployment and employment in advanced economies: Okun’s law with structural break. Theoretical and Practical Research in Economic Fields, 5: 26-41.

  26. Knotek, E. S. (2007). How useful is Okun’s Law? Economic Review, Federal Reserve Bank of Kansas 92(4): 73-103.

  27. Loungani, P., and Mishra, S. (2015). Does Growth Create Jobs in the G-20 Economies? OCP Policy Center, PB-15/22.

  28. McKinsey Global Institute. (2011). An economy that works: Job creation and America’s future. June 2011 Report

  29. Moroke, N., Leballo, G P., Mello, D M. (2014), An empirical robustness of Okun’s Law in South Africa: an error correction modelling approach, Mediterranean Journal of Social Sciences, 5:23:435-43. DOI: 10.5901/mjss.2014.v5n23p435.

  30. Obodoechi, D. & Onuoha, C. (2019). The Validity of Okun’s Law: An Empirical Evidence for Nigeria, American International Journal of Social Science Research, 4(2): 136-142. DOI: https://doi.org/10.46281/aijssr.v4i2.376.

  31. Ojapinwa, T. V. & Lawanson, O. I. (2016), Okun’s law revisited: evidence for Nigeria (1980 – 2014), International Journal of Research in Arts and Social Sciences, 9(1): 180 -192 URI: http://ir.unilag.edu.ng:8080/xmlui/handle/123456789/3106.

  32. Okun, A. (1962), Potential GNP: Its measurement and significance, Proceedings of the Business and Economic Statistics Section of the American Statistical Association, pp. 98-104.

  33. Ola-David, O., Oluwatobi, S., & Ogundipe, A. (2016) Output and unemployment relationship: How applicable is the Okun’s law to Nigeria? The Social Sciences, 11(8): 1422-27. DOI: 10:36478/sscience.2016.1422-1427.

  34. Olumuyiwa O, O. (2017). Structural Transformation and its Effects on Economic Well-being in Nigeria. Babcock Journal of Economics, Vol.6: 114-126.

  35. Olamade, O, O. (2018), Structure, characteristics, and determinants of services export in Nigeria. In: Journal of Economics and Business, 1(3): 299-311.

  36. Phiri, A. (2014). Re-evaluatingOkun's law in South Africa: A nonlinear co-integration approach, MPRA Paper 57398, University Library of Munich, Germany. Retrieved from https://ideas.repec.org/p/pra/mprapa/57398.html.

  37. Pizzo, A. (2019), Literature review of empirical studies in Okun’s law in Latin America and the Caribbean. Employment Working Paper No. 252. Employment Policy Department. International Labour Organisation.

  38. Wen, Yi and Chen, M (2012). Okun’s Law: A meaningful guide for monetary policy? Economic Synopses, 15. https://doi.org/10.20955/es.2012.15

bottom of page