Impact of Technological Change on Level of Employment: A Case Study of Pakistan

This study uses time series data from 2000 to 2020 to evaluate the impact of Research and Development (R&D) expenditure on employment levels in Pakistan. Employing the Fully Modified Ordinary Least Squares (FMOLS) method, along with diagnostic tests like the Augmented Dickey[1]Fuller (ADF) and Phillips-Perron tests, the analysis confirms the stationarity of variables at the first difference and a stable long-run relationship among them. The FMOLS results indicate significant positive relationships between employment and variables such as GDP, total investment, exports, education, and R&D expenditure, with p-values below 0.05 for all coefficients. The Variance Inflation Factor (VIF) analysis showed that multicollinearity is not an issue, with centered VIF values for all variables below the threshold of 10 (e.g., R&D = 2.95, GDP = 1.78). The model's stability was also validated through CUSUM and CUSUM square tests. These findings highlight the pivotal role of R&D investment in addressing unemployment challenges, prompting recommendations for policies that foster technological advancements and public-private partnerships to enhance employment opportunities.