Macroeconomic determinants of unemployment. Macroeconomic Determinants of Equilibrium Unemployment Insurance, Labour 2022-12-16

Macroeconomic determinants of unemployment Rating: 8,5/10 681 reviews

Unemployment is a key indicator of a country's economic health and is affected by a range of macroeconomic factors. In this essay, we will explore some of the main determinants of unemployment and how they can impact the job market.

One of the primary determinants of unemployment is economic growth. When the economy is growing, businesses are more likely to expand and hire new workers. Conversely, when the economy is in a recession, businesses may cut back on hiring or lay off workers in order to reduce costs. This can lead to higher unemployment rates.

Another important determinant of unemployment is the level of productivity in an economy. When workers are productive, they can produce more goods and services, which can lead to higher demand for their labor. On the other hand, if productivity is low, businesses may be less likely to hire new workers or may even lay off existing employees.

The level of wage inflation can also impact unemployment. If wages are rising faster than the rate of productivity, businesses may be less likely to hire new workers due to increased labor costs. On the other hand, if wages are not keeping up with the rate of inflation, workers may be more likely to accept lower-paying jobs in order to remain employed.

The level of government intervention in the economy can also affect unemployment. For example, if the government implements policies that make it easier for businesses to hire and retain workers, such as tax breaks or training programs, unemployment may decrease. On the other hand, if the government imposes regulations that make it more difficult for businesses to operate, such as strict labor laws or high taxes, unemployment may increase.

Finally, global economic conditions can also impact unemployment rates. For example, if a country's major trading partners are experiencing economic downturns, it may lead to reduced demand for the country's exports, which could result in job losses and higher unemployment.

In summary, unemployment is influenced by a range of macroeconomic factors, including economic growth, productivity, wage inflation, government intervention, and global economic conditions. Understanding these determinants can help policymakers and businesses make informed decisions that can help to reduce unemployment and promote economic growth.

Economic Determinants OF Unemployment (SANA)

macroeconomic determinants of unemployment

For firms adopting such strategies, a recession may provide an opportunity to reorganize the production process permanently and reduce payrolls in the process. Cyclical unemployment is unemployment in excess of that associated with the natural level of employment. II In the case of US, its economy began its current economic recovery in December 2001. Each source of unemployment has quite different implications, not only for the workers it affects but also for public policy. Therefore, if ui are normally distributed, so 1,and 2 will make hypothesis testing more straightforward. The test first calculates the skewness and kurtosis measures of the OLS residuals.


Next

Macroeconomic Determinants of Unemployment: Empirical Evidence from Economic Community of West African States

macroeconomic determinants of unemployment

Furthermore, unemployment is very sensitive to changes in GDP and vice versa, which does lend support that rising economic growth can obviously affect unemployment for labour force. In this case, the output gap was not statistically significant. Inflation also used as independent variable in this study. Exports can be a booster in terms of job creation, given that with low aggregate demand in the domestic market, foreign exchange policies favorable to foreign trade can be a solution for the maintenance of existing jobs or for with the need to increase more manpower resources. Conclusions This paper aimed to demonstrate empirical evidence of the long-term relationship between unemployment and macroeconomic variables that influence it.

Next

Macroeconomic Determinants of Equilibrium Unemployment Insurance, Labour

macroeconomic determinants of unemployment

Besides that, he also uses the unit root test of augmented Dickey-Fuller ADF and KPSS test to examine the stationary properties of the economic time series. Even those peoples which are like to work but not actively looking for jobs are excluded from labor force. Failure to fully employ these factors leads to a solution inside the production possibilities curve in which society is not achieving the output it is capable of producing. Copy to Clipboard Reference Copied to Clipboard. United States of America is reckoned to be particularly appropriate as United States of America labor market has proven by all accounts to be more dynamic in the sense of a higher level of job turnover, resulting in high vacancy levels at any point in time. Long-Term Analysis of Estimated Models The verification of the existence of long-term relationship among the variables occurs from the cointegration test.

Next

Unemployment as an Indicator of Macroeconomic Performance

macroeconomic determinants of unemployment

This is because the increment in wages is closely related with the increase in price. This is owned for the economic establishments or for fulfilling the basic needs of the nation. CPI is one of the measurements of inflation rate. Besides that, FDI inflow and inflation are taken into account altogether to identify the relationship towards the unemployment rate. In the United States, the legislation authorizing the pact also provided for job training programs for displaced U.

Next

Determinants of Unemployment: Empirical Evidence from Palestine Munich Personal RePEc Archive

macroeconomic determinants of unemployment

To the extent that such efforts make labor-market information more readily available, they reduce frictional unemployment. Inflation: Continuously expand in prices and the currency value is decreases. In the 1991 recession and then more strongly in the 2001 recession, structural changes dominated. The BLS did not get around to fixing the survey—asking women the same question it asked men—until 1994. Structural unemployment can occur if too many or too few workers seek training or education that matches job requirements. The employment level at which the quantity of labor demanded equals the quantity supplied is called the Figure 5.


Next

5.3 Unemployment

macroeconomic determinants of unemployment

The hypothesis of acceptance of unit root at 10% of significance is adopted here. And examine the relationship of unemployment with population, external debt, exchange rate, GDP and inflation in both short and long run time period. But information is costly. From 2012 also, the Brazilian Institute of Geography and Statistics IBGE modified the metrics of data calculation of unemployment and, therefore, this investigation starts from this change. As a case study, the United States of America has been chosen as the research country.

Next

[PDF] Macroeconomic Factors Affecting Unemployment Rate in China

macroeconomic determinants of unemployment

Each innovation will generate fewer vacancies than before. The data of unemployment rate is obtained from the Bureau of Labor Statistics BLS which if measured in percentage from those people who are 16 years old and above from year 1970 to 2007. Hence, the Jarque-Bera test of normality is a test of the joint hypothesis that S and K are zero and three, respectively. Inflation is another problem that demands the sacrifice of the population, since the monetary policy instrument that seeks to correct this market distortion ends up generating a tradeoff between inflation and unemployment. Journal of Economics and Sustainable development, 3 13 : 20-24. As some results obtained by past researchers showed that economic growth impacts unemployment whereas the others came to a conclusion that unemployment causes economic growth whereby the existence of Granger Causality relationship is quite possible.

Next

Macroeconomic Determinants of Unemployment in Brazil: An ARDL Approach

macroeconomic determinants of unemployment

If the null hypothesis reveals that all regression coefficients are zero, means that the null hypothesis cannot be reject, the Ramsey test is unable to detect any misspecification. However, rather than experiencing employment growth, not only did the unemployment rate increase but the number of new jobs created in the economy actually declined significantly during the first year of the recovery Seyfried. They indicate that government should reduce restrictions on trade should increase the private investment. An economy at its natural level of employment will therefore have frictional and structural unemployment. I 0 and I 1 shows the significance of variables.

Next