Does Okun’s Law Explain the Relationship between Economic Growth and Unemployment in Nigeria?

Ali Madina Dankumo (), Suryati Ishak (), Zubair Azeem Oluwaseyi () and Idowu Daniel Onisanwa ()
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Ali Madina Dankumo: Department of Economics and Development Studies Federal University of Kashere P.M.B 0182, Gombe Gombe State of Nigeria
Suryati Ishak: Faculty of Economics and Management Universiti Putra Malaysia 43400 Serdang, Malaysia
Zubair Azeem Oluwaseyi: Faculty of Economics and Management Universiti Putra Malaysia 43400 Serdang, Malaysia
Idowu Daniel Onisanwa: Department of Economics and Development Studies Federal University of Kashere, P.M.B 0182, Gombe, Gombe State of Nigeria

Jurnal Ekonomi Malaysia, 2019, vol. 53, issue 3, 153-161

Abstract: The issue of unemployment remains the fulcrum of any economic policy because of its attendant effects such as low GDP, increase social ills, etc. Thus, this paper attempts to verify if Okun’s law holds in Nigeria by investigating the dynamic effect of unemployment on economic growth using time-series data for Nigeria covering 22 years from 1996-2017. In examining this matter, this study uses an autoregressive distributed lag (ARDL) approach. The paper sheds light on whether Okun’s law can be applicable outside the US economy to explain the relationship between unemployment and economic growth, with the inclusion of some governance indicators, namely corruption and political instability. The findings revealed that there is a long-run association between economic growth, unemployment, corruption, and political instability. However, unemployment and corruption do not impact economic growth, but only political stability was found to be negatively significant. This outcome implies that in Nigeria, Okun’s law does not explain the connection between unemployment and economic growth. This papaer recommends the government to create employment opportunities through its increase in expenditures in the form of subsidies and loans with less interest, thereby reducing unemployment, increasing productivity, and lastly increasing the growth of the economy.

Keywords: Okun’s law; corruption; economic growth; political instability; unemployment (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:ukm:jlekon:v:53:y:2019:i:3:p:153-161

DOI: 10.17576/JEM-2019-5303-12

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