Service Exports and Youth Unemployment in Africa

Abstract

Abstract Besides waste of human resources, high and growing youth unemployment also threatens social stability in African countries. Reducing youth unemployment therefore solves economic as well as a growing social problem. This article uses a newly constructed data set and three dynamic panel data estimators to investigate the relationship between service exports and youth unemployment in African countries over the 1990–2014 period. Measuring service exports as the growth rate of aggregate service exports and controlling for other covariates, we find that service exports are negatively and significantly correlated with both aggregate and female youth unemployment in African countries in the short term and long run. Panel Granger causality test indicates that service exports Granger cause youth unemployment but not the other way around. Our results are robust to several specification tests as well as estimation methods. Our results are similar to the results of research that finds service exports particularly and exports generally increase employment. While not claiming a causal relationship, the strong negative correlation between service exports and youth unemployment suggests that one mechanism to reduce youth unemployment in African countries is to pursue policies to increase service exports. Service exports could be an alternative to the jobless growth African countries have experienced in the last two decades.