Economic Growth and Unemployment: An Empirical Analysis
Fuad M. Kreishan
DOI : 10.3844/jssp.2011.228.231
Journal of Social Sciences
Volume 7, Issue 2
Problem statement: This research investigates the relationship between unemployment and economic growth in Jordan through the implementation of Okun’s law. Approach: Using annual data covering the period 1970-2008, time series techniques are used to test the relation between unemployment and economic growth and to obtain estimates for Okun’s coefficient. Namely, the study used Augmented Dickey-Fuller (ADF) for unit root, cointegration test and a simple regression between unemployment rate and economic growth. Results: The empirical results reveal that Okun’s law cannot be confirmed for Jordan. Thus, it can be suggested that the lack of economic growth does not explain the unemployment problem in Jordan. Conclusion: The study recommended that economic policies related to demand management would not have an important effect in reducing unemployment rate. Accordingly implementation of economic policies oriented to structural change and reform in the labor market would be more appropriate by policy makers in Jordan.
© 2011 Fuad M. Kreishan. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.