How Economic Growth Affects Unemployment in Zambia

Abstract

Zambia is one of the African countries with abundant resources, both human and mineral. However, due to activities such as increased corruption, gross mismanagement, and anti-government policies, these resources have not been optimally utilized. The study used the model developed by Aktar et al. (2009) in their study titled “The Relationship Between Economic Growth and Unemployment in Turkey: An Empirical Analysis.”. Aktar et al. (2009) regressed unemployment on GDP, exports, and foreign direct investment. The study modified Aktar et al. (2009)'s model, and the specified model was unemployment as a function of GDP, government consumption spending, labour productivity, and the real effective exchange rate. The study used quarterly time series data from 1990 to 2020, which was sourced secondarily from an electronic database. This study used the Augmented Dickey-Fuller (ADF) test for unit root testing to ensure that the time series data used was stationary. The study has established that there is a negative relationship between economic growth and unemployment rate. The nature of the relationship suggests that whenever economic growth is positive, an economy will experience low rates of unemployment. The study has also established that unemployment is also determined by other economic indicators like inflation rate, the exchange rates, FDI and external debt stock. The pursuit of the study was motivated by the growing importance of unemployment and economic growth in developing countries.