Electricity generation as a determinant of unemployment in Pakistan

Abstract

Purpose The area about unemployment and its participation in the economic progress has been widely debated in literature. A significant number of studies on this impediment of economic boom have been found to consider the concept through Okun’s law. This study aims to apply some different approach and re-define the model about determinants of unemployment via inclusion of electricity generation in it. The purpose here for such consideration is the redefinition of determinants to clearly examine the role of each participant in solution of the problem. Design/methodology/approach This study for accomplishment of subject matter considers macroeconomic determinants of unemployment and includes electricity generation process in model. Such model is then empirically tested via structural vector autoregression (VAR) and impulse response function. Findings The empirical analysis of the study by stating the presence of long-run association comprehend the findings of most of the previously held studies on the subject matter. In addition to such co-integration, the presence of long-run restriction validates the main research question by explaining the negative relationship of GDP and electricity generation with unemployment of the country. Additionally, the responses of impulse function further validate the hypothesis by stating the more response of both electricity generation and GDP than any other variable in elucidating the problem of unemployment. Research limitations/implications The main limitation of this study is its restrictive use of electricity generation as a source of power generation. One can use other sources of power generation in addition to electricity generation in the study. Furthermore, this study only applies the concept of macroeconomic variables for getting the solution of problem. Besides macroeconomic factors, a number of microeconomic factors are also present that in addition to above mentioned macroeconomic variables help the policy makers to elucidate the problem. Originality/value The originality of this paper lies in its concept about involvement of electricity generation in determinants of unemployment. To date, no such study has been found in existing body of literature that has investigated the problem from this perspective, and, hence, this study represents contribution of authors to the area of literature.