Exploring the Dynamics of Okun’s Law: Youth Unemployment and Economic Growth in ASEAN-5 Economies

Kamarudin Othman and Muhamad Amirul Salehhin
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Kamarudin Othman: University Teknologi MARA Kedah, Malaysia.
Muhamad Amirul Salehhin: University Teknologi MARA Shah Alam, Malaysia.

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 10, 450-464

Abstract: Objective This study examines the relationship between youth unemployment and economic growth in ASEAN-5 countries, assessing the relevance of Okun’s Law in developing economies. Methodology The analysis uses a Panel Autoregressive Distributed Lag (ARDL) model to study the short- and long-term effects of GDP growth, inflation, and other macroeconomic factors on youth unemployment. The panel data covers 1991 to 2022. Results The findings show a positive relationship between GDP growth and youth unemployment, differing from Okun’s Law expectations. Inflation also has a significant positive effect on youth unemployment. Labor market issues in ASEAN-5 limit the impact of economic growth on reducing youth unemployment. Conclusion The study suggests that Okun’s Law may not fully apply to ASEAN-5, as structural labor market problems, such as skill mismatches, hinder expected reductions in unemployment. The results indicate a need for targeted reforms to address labor market challenges in these economies.

Date: 2024
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