Econometric estimation of the relationship between the unemployment rate and economic growth in Limpopo Province, South Africa


Abstract

Abstract. The study aims to estimate empirically the relationship between economic growth and unemployment rate in Limpopo Province of South Africa. The analysis used quarterly data covering the period 2008-2018 which was obtained from Statistics South Africa. The study employed, difference model, dynamic model, and granger causality test for data analysis, in order to consider both, short term and long term possible relationship Based on the difference model estimation of the coefficient was done and the coefficient was found to be -0.22. From Granger causality test, causal relationship between these two variables doesn’t exist meaning that change in the growth rate of real GDP doesn’t cause change in the rate of unemployment and vice-versa. Inapplicable of the law indicates that a cyclical recovery will not be accompanied by reduction of unemployment. Furthermore, this might reflect the sizable structural and/or frictional component of unemployment in Limpopo Province. Lastly, the country's economic policies have not been suitable for fostering development that can reduce unemployment and this could be due to lack of appropriate composition of public sector and private sector.

Keywords

economic growth; unemployment rate; Okun’s coefficient; Okun’s law

Anderton R., Aranki T., Bonthuis B. & Jarvis V. (2014). “Disaggregating Okun’s Law Decomposing the Impact of the Expenditure Components of GDP on Euro Area Unemployment”, European Central Bank Working Paper Series, 1-26.
Apap, W. & D. Gravino D. (2014). “Okun’s Law in Malta: Lessons Learnt from a Sectoral Perspective”, Ministry for Finance Working Paper Series, 1-25.
Banda H. (2016). “The impact of economic growth on unemployment in South Africa: 1994-2012”, Investment Management and Financial Innovations, 13(2), 246- 255.
Brooks C. (2002). “Introductory econometrics for finance”. Cambridge University Press.
Knotek E.S. (2007). “How useful is Okun's law?”. Economic Review-Federal Reserve Bank of Kansas City, 92(4), 73.
Lal I. (2010). “Test of Okun’s Law in Some Asian Countries Co-Integration Approach”. European Journal of Scientific Research, 40(1), pp.73–80.
Lee J. (2000). “The Robustness of Okun’s Law: Evidence from OECD Countries‖”, Journal of Macroeconomics, 22(2): 331-356.
Levine L. (2013). “Economic growth and unemployment rate”, Congressional Research Service
Limpopo Economic Development.,Environment and Tourism (2017). “Economics for the Limpopo Province, South Africa” Limpopo Province, South Africa.
Malley, J. & Molana H. (2008). “Output, Unemployment and Okun’s Law: Some Evidence from the G7‖”, Economics Letters, 101(2): 113-115.
Okun A. (1962), “Potential GNP: Its Measurement and Significance in Statistics Section?” American Statistical Association, Washington DC.
Phiri A. (2014). “Nonlinear co-integration between unemployment and economic growth in South Africa”. Managing Global Transitions, 12(4), 303.
Pierdzioch C., Rülke J.C. & Stadtmann G. (2011). “Do Professional Economists’ Forecasts Reflect Okun’s Law? Some Evidence for the G7 Countries‖”, Applied Economics, Vol. 43: 1365-1373.
Rafinandadi A. (2012). “Empirical Analysis of the Effects of Central Bank Communications on Money Market Volatility in Nigeria: 2007-2011”, Unpublished Masters Thesis Ahmadu Bello University.
Russell J & Cohn R (2012). “Okun's Law “ Book on Demand”, united kingdom, pp. 131-138.
Download

Published : 2020-12-28


Thaba, T. K., Belete, A., Hlongwane, J., & Ledwaba, L. (2020). Econometric estimation of the relationship between the unemployment rate and economic growth in Limpopo Province, South Africa. Journal of Agribusiness and Rural Development, 58(4), 343–349. https://doi.org/10.17306/J.JARD.2020.01291

Tshephi Kingsley Thaba  thabakingk@gmail.com
UNIVERSIY OF LIMPOPO  South Africa
https://orcid.org/0000-0002-7159-4999
Abenet Belete 
University of Limpopo  South Africa
Johannes Jan Hlongwane 
University of Limpopo  South Africa
https://orcid.org/0000-0001-6840-5811
Lesetja Jacob Ledwaba 
https://orcid.org/0000-0002-4081-2199


CitedBy Crossref
0

CitedBy Scopus
0

HTML tutorial

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

This journal permits and encourages authors to post items submitted to the journal on personal websites or institutional repositories both prior to and after publication, while providing bibliographic details that credit, if applicable, its publication in this journal.