Economic Growth and Unemployment Rate. Case of Albania

Abstract

This thesis studies the relationship between the economic growth and the unemployment rate in Albania. This relation is known as Okun's law, which states that 1 percent decrease in unemployment; GDP will increase by 3 percent. Albania is one of the countries that have a sluggish development and impact of unemployment is negative in the economy of the country. At the same time the economy itself effect the employment of the people. The unemployment occurs when people are without work or seeking work. During recession there is a high unemployment rate. Even some peaks of the development like in the Total Factor Productivity, integration or infrastructure there have been recession and a bad time for the Albania too. This affected the investments, the business and by lowering their profits they are obligated to lay off employees. So the unemployment rate starts to rise up. This study takes in consideration the years from 2000 to 2013 when the unemployment was rising day by day with negative impact in the economy. This thesis introduces the general relationship between gross domestic product and unemployment. The methodology used a simple regression and takes the economic growth as dependent variable and the unemployment rate as independent. The observed result didn't explain the Okun's law for Albania. The main reason is the current crises that prevent the improvement of economic conditions.