Abstract
This study investigates the causes of unemployment in Namibia for the period 1971 to 2007. The analysis is carried out through an extensive review of the relevant literature, microeconomic and macroeconomic models of unemployment. The unemployment model (with macroeconomic variables) is estimated using the Engle-Granger two-step econometric procedure. The results revealed that there is a negative relationship between unemployment and inflation in Namibia. Unemployment responds positively if actual output is below potential output, and if wages increase. An increase in investment causes unemployment to decrease significantly. The results provide evidence that the Phillips curve holds for Namibia and unemployment can be reduced by increasing aggregate demand. It is important to increase output up to the country’s potential, and there is a need for wage flexibility (workers need to reduce their wage demands) in order to decrease unemployment in Namibia. Increasing investment will reduce unemployment significantly.
Highlights
IntroductionThe rise in unemployment rate in Namibia has the potential to cause serious threat to the prevailing peace and stability in the country
Namibia has enjoyed about 20 years of peace and stability
This provides evidence that the the Phillips curve hypothesis holds for Namibia
Summary
The rise in unemployment rate in Namibia has the potential to cause serious threat to the prevailing peace and stability in the country. Unemployment has a significant impact on poverty, homelessness and affects family cohesion. It causes hopelessness and other social evils such as crime, violence, break up of families, alcoholism and prostitution. The narrow definition of unemployment which includes only people who are unemployed and still looking for jobs is at 21.9 percent. Before Namibia’s independence in 1990, black people (mainly youth) had no real expectation of being able to live a good life This has been changed after independence and led to people to believe that they can get jobs and have a good life, but the economy is not generating enough job opportunities
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