The correlation between unemployment and economic growth in Ethiopia

Ethiopia's economic progress is impeded by unemployment as a serious issue. Applying the Johansson co integration and vector error correlation methods, as well as 40-year(1983-2022) yearly time series data, this study experimentally investigates the correlation between unemployment and economic growth. As a result, a 1% rise in unemployment causes the real GDP to fall by roughly 0.03%, indicating that unemployment has a statistically significant negative influence on economic growth. In order to mitigate the adverse effects of unemployment and broaden the pool of employment-generating mechanisms by augmenting investments in sectors other than agriculture that employ a greater labor force the study advocates for the adoption of additional mechanisms for creating jobs, addressing the shortcomings of the labor market, and enhancing labor force productivity through improved policies and increased sectoral linkages. Keywords: Unemployment, Economic growth, Ethiopia, Vector error correlation Model DOI: 10.7176/JPID/64-03 Publication date: January 31st 2025