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Youth Unemployment And Economic Growth In Sadc Countries: An Application Of Okun’S Law Using Panel Data

Author

Listed:
  • Samuel Chingoiro

    (Botho University, Faculty of Business and Accounting, Botswana)

  • Robert P. Machera

    (Botho University, Faculty of Business and Accounting, Botswana)

  • Strike Mbulawa

    (Botho University, Faculty of Business and Accounting, Botswana)

Abstract

The study investigates whether policies, both regional and country specific, should mainly focus on accelerating economic growth in the region to reduce youth unemployment in the SADC region. In this endeavour, the study is based on Okun’s law which prescribes that unemployment rates should generally begin to fall when economic growth rates rises above the economy’s potential. The study uses panel data for selected SADC countries whose annual youth unemployment rate is above the region’s average annual rate of 20%. Upon performing a variety of panel model mis-specification tests, the systems GMM model was chosen as the suitable model. Our findings support Okun’s proposition of a negative relationship between changes in economic growth and changes in unemployment rates. Our model predicts a 9.85 percent reduction in youth unemployment for every one-point increase above the region’s GDP growth rate.

Suggested Citation

  • Samuel Chingoiro & Robert P. Machera & Strike Mbulawa, 2022. "Youth Unemployment And Economic Growth In Sadc Countries: An Application Of Okun’S Law Using Panel Data," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 1(50), pages 51-61, April.
    • Handle: RePEc:aio:aucsse:v:1:y:2022:i:50:p:51-61
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    References listed on IDEAS

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    1. repec:ilo:ilowps:470297 is not listed on IDEAS
    2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    4. Hutengs, Oliver & Stadtmann, Georg, 2013. "Don't trust anybody over 30: Youth unemployment and Okun's law in CEE countries," Discussion Papers 333, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    5. Esteban Ferro & Thomas Farole & Veronica Michel Gutierrez, 2017. "Job Creation in the Private Sector," World Bank Publications - Reports 28370, The World Bank Group.
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    More about this item

    Keywords

    Unemployment; Growth; Okun’s Law;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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