Linking and Delinking Aspects of Economic Growth and Employment in the Indian Economy: Granger Causality Approach

Abstract

The purpose of this paper is to provide an overview of various economic growth and employment approaches that have been popular throughout economic history, with a focus on linking and delinking aspects of GDP and employment in the Indian economy. The semi-log quadratic model was used for the trends of GDP and employment across the selected countries. For the determination of the linkages between the variables, the Granger causality test promulgated by Engel and Granger (1987), and the maximum likelihood-based technique of Johansen and Julius (1990) and Johansen (1992) were used in the study. The results found that employment and GDP are two different aspects of an economy not only in the Indian economy but across the majority of the world economies. The results of model specification proved the presence of both long-run and short-run relationships between GDP and employment by the Johansen co-integration test in the Indian economy over the period. It has been found that the increase in GDP is negatively influencing the employment level by the VECM model as a 1 per cent increase in GDP results in 0.28 per cent of job losses in the Indian economy. This study aims to provide an overview of several approaches to economic growth and employment that have been popular throughout economic history up to the present, with an emphasis on linking and delinking aspects of economic growth and employment. In the context of an economy, economic growth and employment are two distinct aspects that should be tackled with separate economic strategies.