Gulshan Campus

Determinants of Unemployment
Presented By Ansab Khan (3925)

Introduction
Unemployment is defined as the condition of having no job or being out of work or proportion of people which are able to work and actively searching jobs but they are unable to find it. Unemployment is one of the major problems in almost all countries of the world. Though a lot of work has been done on relationship between unemployment and other set of macroeconomic variables but less attention is paid to determinants of unemployment i.e. what are the major determinants of unemployment? This research proceeds to utilize simple econometrics technique of Regression analysis for analyzing determinants of unemployment based on evidence from Pakistan economy.

Model
I have estimated simple single equation linear regression model (SELRM) for analysis of determinants of unemployment in Pakistan economy. Simple specification of SELRM is given below. UR = 0 + 1PG + 2FDI + 3INR +
UR = unemployment rate PG = population growth FDI = Foreign Direct Investment INR = Inflation rate (CPI based)

Expected Sign
Sadf Asdfasd asdfasdf

Descriptive Stats Mean 1454.315 9.1085 Median 641.7 9.555 Maximum 5410.2 20.77 Minimum 246 3.1 Std. Dev. 1650.474 4.311436 Skewness 1.441154 0.6538 Kurtosis 3.64153 3.742033 Jarque-Bera 7.266054 1.883693 Probability 0.026436 0.389907 Sum 29086.3 182.17 Sum Sq. Dev. 51757232 353.1811 Observations 20 20

141.513 140.88 173.51 112.61 18.62805 0.134441 1.895776 1.07634 0.583816 2830.26 6593.081 20

0.06285 0.0592 0.0828 0.0473 0.01184 0.551919 1.837057 2.142413 0.342595 1.257 0.002664 20

FDI INF

FDI 1 0.32164589 2

Correlation INF 0.321645892 1

PG UER 0.7557900 95 0.31194249 2 0.0348563 01 0.69134960

Regression Results
Dependent Variable: UER Method: Least Squares Date: 04/23/12 Time: 21:19 Sample: 1991 2010 Included observations: 20 Variable Coefficie Std. Error tnt Statistic C 0.062487 0.0143 4.369807 PG 0.000515 0.000205 2.505183 LOG(FDI) 0.003994 0.008833 2.21151 2 INF 0.000482 0.001395 2.894808 R-squared 0.806043 Mean dependent var Adjusted R0.722739 S.D. dependent var squared S.E. of regression 0.007901 Akaike info criterion Sum squared 0.000999 resid Log likelihood 70.66819 Durbin-Watson 1.477891 stat

Prob. 0.0005 0.0234 0.0419 0.0106 0.06285 0.01184

6.666819 Schwarz criterion 6.467673 F-statistic 8.890519 Prob(F-statistic) 0.001065

Conclusion
Unemployment is one of the major problems in almost all countries especially less developed countries. Unemployment can be viewed from different dimensions but the present research focus on the determents of unemployment. Finding reveals that population growth contributes to unemployment positively FDI and inflation rate has negative impact on unemployment.

Implications
Based on findings, it is highly recommended that govt. should give proper attention to population growth. Rapid growth of population creates unemployment pressure along with other problems. All possible steps are needed to capture investor from abroad because FDI plays very vital role in decreasing unemployment. Govt. should try attracting foreign investor.