Journal of Economics and Sustainable Development ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.

%) 2 1*

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Employment And Economic Growth In Nigeria: Specification

David ,-&.,) !"/.D#

A Bounds

Department of Economics) 0an1ing 2 3inance) 3acult4 of Social 2 -anagement Sciences) 0enson Ida/osa ,niversit4) 0enin 5it4) Nigeria 6Email7 udavidson2 Abstract ;/e paper e<amines empiricall4) w/et/er or not emplo4ment impact significantl4 and positivel4 on GDP growt/ in Nigeria over t/e sample period of t/irt4-eig/t 4ears. ;/e newl4 developed bounds testing approac/ to co-integration was adopted in t/e stud4. ;/e results obtained reveal t/at bot/ t/e s/ort-run and long-run growt/ effects of emplo4ment in Nigeria are significant and positive. In particular) t/e results s/ow t/at for a one-percentage point increase in emplo4ment) .%=$ percent real GDP growt/ rate is induced in t/e long-run. >aving ascertained t/e significance of emplo4ment in positivel4 influencing economic growt/ in Nigeria) t/e stud4 t/us recommends a set of policies to t/e Nigerian fostering economic growt/ in Nigeria. government wit/ a view to en/ancing emplo4ment and 84a/oo.com) -obile7 92*($ **$$$(1(:

Key words: Emplo4ment) economic growt/) 0ounds) co-integration) st4li?ed facts

1 BA!KG"#$N% Emplo4ment is an economic drift t/roug/ w/ic/ /uman resources are put into productive use. ;/us) in t/e @e4nesian economic anal4sis) emplo4ment is envisaged as a pat/wa4 to en/ance t/e growt/ rate of an econom4. ;/is is because w/en t/ere is emplo4ment) t/ere is productivit4 !@e4nes) 1+*=#. >ence) t/e ac/ievement of full emplo4ment /as often been seen as one of t/e germane macroeconomic obAectives facing an4 civili?ation. ;/e opposite of emplo4ment is unemplo4ment) w/ic/ signifies wastage of /uman resources because goods and services t/at could /ave been produced are forgone. Bs at 2 at 1 .$ percent !Corld 0an1) 2 7) t/e Nigerian unemplo4ment rate was estimated

7#. ;/is /as made it possible for about %7 percent of t/e Nigerian population to

live below t/e povert4 line on less t/an ,SD1 per da4 !,ND") 1++ #. Bccording to &1igbo !1+$=#) unemplo4ment is a national curse t/at /as assumed a universal dimension. ;/is indeed) corroborates ,moEs position t/at t/e unutili?ed large Fuantum of /uman resources in Nigeria due to non-availabilit4 of emplo4ment opportunities /as t/e possibilit4 of impeding t/e countr4Es growt/ prospect !,mo) 1++%#. In essence) t/e persistence of unemplo4ment is an indication t/at t/e econom4 is t/rowing awa4 output b4 failing to utili?e its /uman capital. ;/is /as been against t/e bac1-drop of t/e fact t/at w/en /uman capital is not been utili?ed) actual output would be less t/an potential output.

Bs of 2

+) Nigerian labour force emplo4ment b4 sector was 7 percent in agriculture) 2 percent in services

and 1 percent in industr4 !;able 1#. ;/e oil industr4) t/oug/ a maAor contributor to foreign e<c/ange earnings) emplo4s less t/an one percent of t/e labour force !Sodipe and &gunrinola) 2 11#. 5urrentl4) t/e total wor1

force in Nigeria is %2)%1 )21+ people !5IB Corld 3act 0oo1) 2 1 #. ;/is is t/e population between t/e ages of 2 and %+ 4ears. ;/e government emplo4s about 2) (7%)$ wor1ers of t/e wor1 force. ;/is is about % percent of

(+

Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* t/e wor1ing population and represents onl4 $ percent of t/e emplo4ment in t/e countr4. ;/us) t/e rest of t/e emplo4ment) +2 percent is provided t/roug/ t/e private sector. B total of 2$)(21) t/e private industr4 and service sectors between 1+++ and 2 1++ and 2 $ people were emplo4ed in =#. 0etween

% !National 0ureau of Statistics) 2

) a number of private firms laid off almost + percent of t/e wor1 force owing to tig/tening

business environment. ;/is led to a decrease in t/e emplo4ment in t/e formal private sector between 1++ and 2 .

Cit/ t/e end of t/e oil boom in 1+$2) Nigeria found itself in a stic14 situation of economic problems. 5onseFuentl4) in Jul4 1+$=) t/e government adopted an influential and fundamental economic measure in t/e form of a Structural Adjustment Programme (SAP). &ne of t/e maAor obAectives of SAP was Gto restructure

and diversify the productive base of the economy in order to reduce dependence on the oil sector and on importH as a means of ac/ieving fiscal and balance of pa4ments viabilit4 in t/e medium term and la4ing t/e basis for a sustainable growt/ of t/e econom4 in t/e long term. During t/e SAP era) t/e rural sector seems to /ave absorbed more labour t/an t/e urban !Bde1an4e) 1++%#. Bccording to National 0ureau of Statistics !2 1 #) an active population and a gainfull4 emplo4ed labour force /ave /ig/ potential to contribute to t/e growt/ of national output for economic development. ;/e stud4 is t/erefore set out to ascertain w/et/er or not emplo4ment impact significantl4 and positivel4 on economic growt/ in Nigeria. in view of t/e reseac/ obAective) we /4pot/esi?ed t/at emplo4ment /as no significant positive impact on t/e growt/ rate of GDP in Nigeria. ;/is paper is t/us of polic4 significance as it answers t/e Fuestion) Gdoes emplo4ment matter for GDP growt/ in NigeriaIH C/at is t/e level or magnitude of emplo4ment in NigeriaI ;/e remaining part of t/e paper is organi?ed into si< sections. Section two provide a succint st4li?ed growt/ fact anal4sis. Section t/ree reviews prior empirical studies on t/e growt/ effects of emplo4ment. Section four e<pouse on t/e met/odolog4) specification of empirical model and t/e met/od of estimation. Section five discuses t/e regression results. Jastl4) section si< concludes t/e paper.

& S'()I*E% +A!'S 2. . Gro!th Performance and "mployment #rends in $igeria In 2 %) t/e GDP was composed of 2=.$ percent of agriculture) ($.$ percent of industr4 and 2(.( percent of =#. ;/e countr4Es GDP per capita w/ic/ gained its pea1 at 2$* percent in

services !Bdeba4o and &gunrinola) 2

t/e 1+7 s) is toda4 ran1ed *1st in t/e world in terms of purc/asing power parit4 comparisons !5IB Corld 3act 0oo1) 2 1 #. In 1+$*) KD" growt/ rate was negative) -%.( percent. It gained improvement in 1+$$ at 1 percent !Corld 0an1) 1++%#. Even at t/is improvement) emplo4ment onl4 rose from 2+.7 million in 1+$ to * .= million in 1++(. ;/us) over t/e entire period) emplo4ment rose b4 1 million w/ile output increased b4 almost N2$ billion. In effect) t/is implies t/at growt/ rate of emplo4ment lagged be/ind GDP growt/ between t/e periods of 1+$ t/roug/ to 1++(. ;/is /as been attributed to underutili?ation of capacit4 in t/e countr4. Bs it were) t/e capacit4 utili?ation rate fell steadil4 from 7 .1 percent in 1+$ to (7.$ percent in 1+$*) from w/ere it cras/ down to a miserable 2+.2 percent in 1++(.

Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* Cit/ regard to t/e totalit4 of t/e foregoing) it seems t/at t/e Nigerian econom4 /as been relativel4 unstable. Suc/ macroeconomic instabilit4 is easil4 inveterated b4 t/e volatilit4 of t/e 1e4 macroeconomic aggregates) particularl4 GDP growt/) emplo4ment rate) inflation rate and capacit4 utili?ation rate. 3or e<ample) t/e inflationar4 spiral in t/e countr4 /as been estimated as a 12-mont/ average of 7.$ percent in 2 + !Corld 0an1) 2 1 #. ;/e growt/ rate

of t/e Nigerian labour force w/ic/ /as been found relativel4 constant is 2.= percent per annum !;able 1#. Cit/ t/is labour mar1et growt/ !2.=L# w/ic/ is less t/an t/e growt/ rate of t/e population) it means t/at over a period of ten 4ears sa4) 2 to 2 1 ) t/ere was an aggregate rise of about 2= percent in t/e labour force t/at could not get

emplo4ment in t/e formal sector. 04 intiution) a greater percentage of t/e labour force would /ave been unemplo4ed if t/e growt/ rate of t/e labour force was t/e same wit/ t/at of t/e population.

'able 1: Economy of Nigeria, -acroeconomic .olicy Indicators, &/1/ 0 &/1& Growth Indicators GDP (Nigerian PPP) GDP Growth Rate (Per ca ita) GDP (Per ca ita) GDP (b$ %ector) Ser&ice% 'n()%tr$ *gric)lt)re Statistics US$374.3 billion 7.! US$2"#00 US$1"200 2!.+ 2,.+ 4!.# Statistics 47.33 0illion (1) 2.+ 20 10 70 2.+ ! ,2 4+ 0illion (1) 4., Year 2010 2010 2010 2010 2010 2010 2011 Year 200, 2012 2012 2011 2012 2012 2012 2011 2012 2012

Employment Indicators -abo)r .orce (%i/e) -abo)r .orce (growth) %er&ice% in()%tr$ agric)lt)re go&ern0ent ri&ate %ector

20 lo$0ent (b$ %ector)

Une0 lo$0ent (%i/e) Une0 lo$0ent (growth rate) Source:

5entral Intelligence Bgenc4 !5IB# Corld 3act 0oo1

1 "E2IE3 #+ )I'E"A'$"E %. . "mpirical Studies on the Gro!th "ffect of "mployment& A 'rief Survey of the "vidence ;/ere e<ists an enormous amount of empirical literature on t/e relations/ip between emplo4ment and GDP growt/. ;/ese empirical studies include t/e wor1s of I4o/a !1+7$#) &ladeAi !1+$7#) 0ec1er et al. !1++ #) 0arro !1++1#) &gunrinola !1++1#) Jevine and .enelt !1++2#) Ja4ard et al. !1++(#) Bn4anwu !1++%#) "andalino and 'ivarelli !1++7#) Calters1irc/en !1+++#) 3ofana !2 Sawtelle !2 7#) Mogo !2 1#) and &nwioduo1it !2 =#) Swane and 'istrand !2 =#)

$# and Sodipe and &gunrinola !2 11#. ;/e general consensus from all t/e empirical

%1

Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* studies is t/at emplo4ment occupied a vintage position in t/e anal4sis of economic growt/ in most developing and developed countries. Specificall4) emplo4ment /as been t/oug/t of as a pat/wa4 to en/ance t/e growt/ rate of an econom4 !I4o/a) 1+7$N &ladeAi) 1+$7N 0ec1er et al.1++ N 0arro) 1++1N &gunrinola) 1++1N Jevine and .enelt) 1++2N 0arro) 1++1N 0ec1er et al.1++ and &nwioduo1it) 2 =#.

In Nigeria) I4o/a !1+7$# opined t/at emplo4ment generation is a significant drive of t/e growt/ rate of GDP in Nigeria. Sodipe and &gunrinola !2 11# formulated a simple model of emplo4ment t/at was subAected to (east S)uare estimation /aven corrected for non*stationarity on t/e basis of t/e +odric,*Prescott filter. ;/e result of t/eir econometric anal4sis s/ows t/at a positive and statisticall4 significant relations/ip e<ists between emplo4ment level and GDP growt/ in Nigeria. In t/is regard) Sodipe and &gunrinola !2 11# obtained t/e empirical finding t/at supports t/e strand of t/eor4 suggesting t/at t/e positive relations/ip between GDP and emplo4ment is normal and t/at an4 observed Aobless growt/ mig/t Aust be a temporar4 deviation. Bccording to Bn4anwu !1++%#) unemplo4ment li1e inflation is a s4mptom of basic economic diseFuilibrium. >e furt/er added t/at emplo4ment is a necessar4 and positive instrument to accelerate t/e rate of economic growt/ in countries suffering from acute slow growt/. Indeed) Bn4anwu !1++%# argued t/at if t/e abundant /uman resources is /ig/l4 utili?ed) it would serve as a great catal4st to economic growt/ but if ot/erwise) could e<ert negative influence on t/e econom4.

In t/eir panel data stud4) "andalino and 'ivarelli !1++7# obtained a significant positive growt/ effect of emplo4ment for t/e K-7 countries. 3ofana !2 1# argued t/at t/e emplo4ment- growt/ relations/ip is significant

and positive for 5ote dEIvoire /aven utili?ed time series data in t/e stud4. 3ofana results were never in isolation as t/e4 were corroborated b4 t/ose obtained b4 Swane and 'istrand !2 =#. ,sing t/e emplo4ment-population =# found a significant and $# posits

ratio as a pro<4 variable for emplo4ment generation inde<) Swane and 'istrand !2

positive relations/ip between GDP growt/ and emplo4ment growt/ in Sweden. &n /is part) Mogo !2

t/at t/e emplo4ment issue in sub-Sa/aran Bfrica is mostl4 a matter of Fualit4 rat/er t/an Fuantit4. In particular) Mogo !2 $# observed t/at t/e wea1 emplo4ment-growt/ ne<us is not attributable to labour mar1et rigiditiesN but

rat/er to t/e wea1ness of productivit4 growt/ over time. Bccording to Calters1irc/en !1+++#) t/e relations/ip between GDP growt/ and c/ange in unemplo4ment is in two folds namel4N t/ose c/anges in emplo4ment and unemplo4ment rates governed b4 economic factors as well as t/ose governed b4 demograp/ic influences and labour mar1et policies. ;/e aut/or t/us investigated t/e relations/ip between economic growt/) emplo4ment and unemplo4ment in t/e European ,nion on one /and) and on t/e ot/er anal4?ed t/e lin1 between economic growt/ and t/e labour mar1et. In sum) Calters1irc/en !1+++# found t/at a strong positive correlation between GDP growt/ and c/ange in t/e level of emplo4ment. Sawtelle !2 7# estimated a significant positive elasticit4 of

emplo4ment wit/ respect to real GDP in eac/ of fourteen industr4 sectors of t/e ,S wit/ respect to c/anges in real GDP during t/e ten 4ear period of 1++1-2 1. Ja4ard et al !1++(# posits t/at unemplo4ment reduces output

and aggregate national income. It erodes /uman capital.

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Journal of Economics and Sustainable Development ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* 4 -E'5#%#)#G( AN% -#%E) S.E!I+I!A'I#N -. . 'ounds #esting .ethodology and .odel Specification

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;/e stud4 emplo4ed t/e recentl4 developed econometric tec/niFue of bound co-integration anal4sis in anal4?ing t/e data. ;/is bounds testing tec/niFue to co-integration is due to "esaran) S/in and Smit/ !2 1#. It is a

tec/niFue of testing t/e e<istence of a level relations/ip between a regressand and a vector of regressor) w/en it is indeed un1nown wit/ certaint4 w/et/er t/e underl4ing set of regressor are trend stationar4 or first stationar4. ;/e approac/ is based on t/e specification of an autoregressive distributed lag !B.DJ# model. ;/e econometricall4 illuminating advantages of t/e bounds testing tec/niFue include t/e fact t/at t/e endogeneit4 problems and inabilit4 to test /4pot/eses on t/e estimated coefficients in t/e long-run associated wit/ t/e Engle-Kranger !1+$7# met/od are avoided) t/e long and s/ort-run parameters of t/e model under stud4 are estimated simultaneousl4) t/e econometric met/odolog4 is devoid of t/e tas1 of establis/ing t/e order of t/e A/D( approac/ to

integration amongst t/e variables and of pre-testing for unit roots. 04 implication)

testing for t/e e<istence of a long-run relations/ip between t/e variables in levels is applicable irrespective of w/et/er t/e underl4ing regressors are purel4 0! #) purel4 0!1#) or fractionall4 integrated.

In effect) t/e bounds testing approac/ allows a mi<ture of 0!1# and 0! # variables as regressor wit/ t/e implication t/at t/e order of integration of variables ma4 not essentiall4 be t/e identical. ;/erefore) t/e B.DJ tec/niFue /as t/e advantage of not reFuiring a specific identification of t/e order of t/e underl4ing data !"esaran et al.) 2 1#. ;/us) t/e procedure is to test t/e significance of t/e lagged levels of t/e variables in a univariate 1# developed two set of as4mptotic critical values eFuilibrium error correction mec/anism. "esaran et al !2 "esaran et al. !2

namel4) set one is t/e set for purel4 0!1# regressors and t/e ot/er set is for t/e purel4 0! # regressors. 3ollowing 1#) we assemble t/e vector auto-regression !'B.# of order p1 denoted 'B. !p#) for t/e following growt/ eFuation7

Gt = + i 2 t i + t
i =1

61 17

C/ere 2 is t/e vector of bot/ t/e regressors and lagged values of t/e regressand) t is a time or trend variable. Bccording to "esaran et al. !2 1#) t/e regressand must be 0!1# variable) t/at is) first differenced stationar4) but t/e set of regressors can be eit/er 0! # or 0!1#. ;/e corresponding vector error correction model !'E5-# is t/us specified as follows7

Gt = + t + Gt 1 + t 2 t i + t Gt i + t
i =1 i =1

p i

p 1

61 &7

C/ere is t/e first-difference operator) G is t/e regressand defined as t/e growt/ rate of real GDP a pro<4 variable for economic growt/) 2 is t/e vector of regressor w/ic/ we /ave in t/is stud4 as emplo4ment rate (".P#)1 capacit4 utili?ation rate (3A4#)1 gross fi<ed capital formation as a percentage of GDP (G355) and t/e public e<penditure (P"6P). Bs usual) t is a time !trend# variable and term. ;/e long-run multiplier matri< is defined as7

is a Kaussian stoc/astic disturbance

77 = 67

76 66
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Journal of Economics and Sustainable Development ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1*

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;/e diagonal elements of t/e matri< are unrestricted) so t/e selected series can be eit/er 0! # or 0!1#. If 77 t/en 7 is 0!1#. In contrast) if 77

= )

< ) t/en 7 is 0! #. ;/e 8"3. procedure is imperative in testing for at most

one co-integrating vector between t/e regressand and t/e vector of regressors. ;/us) following "esaran et al. !2 1# as in t/eir 5ase III of unrestricted intercepts and no trends) /aving imposed t/e restrictions and = ) our unrestricted error correction A/D( unrestricted error correction model can be

77 = )

derived as follows.

!GGDP #t = + 1 !GGDP #t 1 + 2 ! ".P# #t 1 +

* !3A4# #t 1 + ( !G355 #t 1 + % ( P"6P )t 1 +

p ) m

= !GGDP#t i + 7 ! ".P# #t i + $!3A4# #t i +

i =1 l i= i=

+ !G355 #t i +
i=

i=

! P"6P#t i + t !*.*#

EFuation !*.*# is A/D( of order !p1 )1 m1 l1 j# w/ic/ /olds t/at economic growt/ is predisposed to be determined b4 its own lag) t/e lag values of growt/ rate of gross domestic product !GGDP)1 emplo4ment rate (".P#)1 capacit4 utili?ation rate (3A4#)1 gross fi<ed capital formation (G355) and public e<penditure (P"6P). ;/e structural lags are conventionall4 determined on t/e basis of minimum B1ai1eEs information criteria !BI5#. 3rom t/e estimation of B.DJ unrestricted error correction model) t/e long-run elasticities are t/e coefficients of one-period lag of t/e regressors !multiplied b4 a negative sign# divided b4 t/e coefficient of t/e one-period lagged value of t/e regressand !0ardsen) 1+$+#. Bccordingl4) as in our A/D( model) t/e long-run elasticit4 effects of emplo4ment) capacit4 utili?ation) gross fi<ed capital formation and public e<penditure are computed as ! 2

O 1 #) ! * O 1 #) ( ( O 1 ) and ( % O 1 ) respectivel4. ;/e s/ort-run effects are obtained directl4 as t/e

estimated coefficients of t/e first-differenced variables in t/e A/D( model.

-.2. #he 9ald #est for Short*run 3ausality& 2ero /estriction +ypothesis >aving estimated our unrestricted error correction B.DJ model) t/e Cald test based on t/e standard 5-statistic was computed to establis/ t/e co-integration relations/ip between t/e variables in t/e stud4. ;/e Cald test was conducted b4 imposing t/e following restriction on t/e estimated long-run coefficients of economic growt/) emplo4ment rate) capacit4 utili?ation as percentage of GDP1 and gross fi<ed capital formation as a percentage of KD".

%(

Journal of Economics and Sustainable Development ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1*

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1 2 + 7 * = ( %

1 2 ) +1 7 * ( %

;/e null !alternative# /4pot/eses /old t/at co-integration relations/ip does not e<ist!e<ist# respectivel4. ;/e computed Cald statistic adAudged significant or insignificant on t/e basis of t/e critical values tabulated in #able 30 (iii) of "esaran et al. !2 1#. ;/e time series data utili?ed in t/e stud4 covered t/e sample period) 1+7% to 2 12. ;/e data on real gross domestic product) capacit4 utili?ation and public e<penditure were sourced from various issues of t/e 3'$Es annual report and statistical bulletins. "ublic e<penditure was pro<ied b4 total government e<penditure w/ic/ consists of bot/ recurrent and capital. Data on emplo4ment were sourced from t/e bulletins of t/e 3ederal &ffice of Statistics.

8 "ES$)'S ;/e 0ounds results of t/e unrestricted error correction B.DJ model are reported in Bppendi< A1. ;/e coefficient on emplo4ment is positive and statisticall4 significant. ;/is indeed) empiricall4 rationali?ed validate t/e /4pot/esis t/at emplo4ment positivel4 and significantl4 stimulate long run economic growt/. 3or t/e control variables in t/e stud4) t/e results reported a negative long run impact on t/e growt/ rate of GDP. ;/e finding t/us implies t/at capacit4 utili?ation does not positivel4 influence long run growt/. 3or t/e control variables) G535 is positivel4 significant at ten percent significant level. ;/is finding s/ows t/at an increase in gross fi<ed capital formation will increase t/e economic growt/ in long run. ;/e coefficient of model determination /aving adAusted for degrees of freedom is .=2%. Bs it were) =2.% percent of t/e total variation in t/e growt/ of real output is corrected for wit/in one 4ear of adAustment. ;/us) /aving adAusted for degrees of freedom) t/e estimated error correction model can be adAudged statisticall4 fit and robust. ;/e 3-statistic is 1%.++$. ;/is is /ig/l4 significant. It implies an overall significance of t/e estimated model. ;/is indeed is a re-enforcement of t/e goodness of fit of t/e estimated error eFuation. ;/e reported 3 ratio passes t/e significance test at t/e conservative /alf percent level of significance. ;/is goes along e<tent to indicate t/e e<istence of a significant linear long-run relations/ip between t/e growt/ rate of national output and t/e level of emplo4ment in Nigeria. &n t/e part of individual significance of eac/ e<planator4 variable) it is evident t/at capacit4 utili?ation is vital for stimulating t/e growt/ rate of output in Nigeria. Kross capital formation also passes t/e test of significance at t/e % percent level of significance. In effect) t/ese suggest t/at emplo4ment) capacit4 utili?ation and gross capital formation economic growt/ are significant determinants of growt/ in Nigeria.

;/is furt/er reinforces t/e fact t/at t/e results reported are of polic4 significance. ;/e results of t/e bounds co-integration test !Bppendi< A&# reAects t/e /4pot/esis of no co-integrating relations/ip between t/e growt/ rate of GDP1 emplo4ment) capacit4 utili?ation) gross fi<ed capital formation and public e<penditures at t/e one percent significance level. In simple terms t/erefore) t/e results s/ow t/at t/ere is long-run relations/ip between emplo4ment) capacit4 utili?ation) gross fi<ed capital formation) total government e<penditure pro<ied for public

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Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* e<penditure and GDP growt/ in Nigeria. ;/is is against t/e bac1-drop of t/e fact t/at t/e computed 5-statistic of =.%%% is greater t/an t/e lower critical bound value of *.7(. ;/e long-run elasticit4 of t/e GDP growt/ rate wit/ respect to emplo4ment is .%=$ in Nigeria !Bppendi< A1#. Econometricall4 revealing is t/e robustness of t/e estimated regression results. ;/is is made evident b4 t/e diagnostic statistical c/ec1s w/ic/ include t/e 'reusch* Godfrey serial correlation (. test1 A/3+ test for heteros,edasticity1 :ac)ue*'era normality test and /amsey /"S"# specification test. Bll t/e tests disclosed t/at t/e model possess t/e desirable 0J,E properties. Indeed) t/e modelEs residuals are seriall4 uncorrelated) normall4 distributed and /omos1edastic. ;/erefore) t/e estimated set of results is devoid of t/e econometric problems of autocorrelation) misspecification and /eteros1edastcit4.

,sing t/e Cald statistical test procedure) t/e d4namic s/ort-run causalit4 effect was determined b4 placing t/e ?ero restriction on t/e coefficients of emplo4ment) capacit4 utili?ation) gross fi<ed capital formation and public e<penditure wit/ t/eir lag values also eFuated to ?ero. ;/e results are as reported in Bppendi< A4. &n t/e

reAection of causalit4 among t/e aforementioned regressors) we indeed establis/ t/at emplo4ment) capacit4 utili?ation) gross fi<ed capital formation and public e<penditure are statisticall4 significant to granger-cause GDP growt/ rate in Nigeria at bot/ t/e one percent and five percent significance levels respectivel4. 3ollowing

"esaran and "esaran !1++7#) we tested for long-run coefficient stabilit4 on t/e basis of t/e 34S4. and 34S4.S;. 3igures P1 and P2 plot t/e 34S4. and 34S4. of sFuares statistics. ;/e results clearl4 indicate t/e absence of instabilit4 of t/e estimated coefficients because t/e plot of t/e 34S4. and 34S4.S; statistic!s# is wit/in t/e confines of t/e five percent critical bounds. In effect t/erefore) t/e estimated long-run parameters are stable as t/ere are no structural brea1s. 04 implication) our parameters are reliable.

+igure 1: !$S$- and !$S$-S9 .lot of Structural Brea: .oints 3ig. P17 5,S,12 8 4
0.8

3ig. P27 5,S,-SQ

1.6

1.2

0
0.4

-4
0.0

-8 -12 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 CUSUM 5% Significance

-0.4 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 CUSUM of Squares 5% Significance

; !#N!)$SI#N In t/is paper) we empiricall4 e<plored t/e t/e role of emplo4ment in stimulating economic growt/ over a t/irt4-eig/t 4ear sample period. Cit/ emplo4mnet being t/e 1e4 variable under stud4) ot/er regressors namel4) capacit4 utili?ation) gross capital formation and public of all t/e aforementioned variables wit/ t/e growt/ rate of GDP were tested on t/e basis of an estimated econometric model. 3lowing from t/e empirical results is t/e fact t/at emplo4ment and econmic growt/ are positivel4 related in Nigeria. ;/e maAor finding is t/at

%=

Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* emplo4ment contributes significantl4 to GDP growt/ in Nigeria. ;/is t/en suggest t/e need for policies to en/ance emploment prospects wit/ t/e ultimate aim of fostering a sustained increase in t/e growt/ rate of real GDP. ;/us) t/e Nigerian government s/ould implement a broad set of emplo4ment generating policies t/at can /elp abridge unemplo4ment. In addition) policies s/ould be put in place to intensif4 e<isting emplo4ment promotion programmes. ;/is is /ig/l4 desirious considering t/e urgent need to aptl4 en/ance t/e growt/ prospect of t/e econom4. "E+E"EN!ES Bde1an4e) J.0. !1++%#) Structural BdAustment) Democrati?ation and .ising Et/nic ;ensions in Bfrica. Bn4anwu) J.5. and >.E. &ai1/enan !1++%#) -acroeconomic ;/eor4 and Bpplication in Nigeria. Joanee Educational "ublis/er) &nits/a. Bdeba4o) B. and I. &. &gunrinola !2 Economic Societ4) Nigeria. 0aland) J. and ". 3rancois !2 %27-(2. 0aldwin) ..E. !1++%#) R;/e Effect of ;rade and 3oreign Direct Investment on Emplo4ment and .elative CagesE) <"3D "conomic Studies 2*7 7-%(. "aris7 &rgani?ation for Economic 5o-operation and Development 0lanc/flower) D.) and .. 0. 3reeman !1+++#) 7outh "mployment and :oblessness in Advanced 3ountries. N0E. 5omparative Jabor -ar1ets Series. 5/icago) Ill.7 ,niversit4 of 5/icago "ress. 5/icago. 0rec/er) .. B. !1+7(# R-inimum Cage .ates and t/e "ure ;/eor4 of International ;radeE) #he ;uarterly :ournal of "conomics) $$!1#7 +$-11=. 5entral 0an1 of Nigeria. !2 #) #he 3hanging Structure of the $igerian "conomy and 0mplications for %#) R;rade Jiberali?ation and Emplo4ment Effects in ,1raineE) 02A Development. Abuja7 50N. 5/ristev) B.) &. @upets and >. Je/mann !2 Discussion Papers) No. 1$2=. 0onn7 Institute for t/e Stud4 of Jabor. 5orden) C.-. !1+$(#) R0ooming Sector and Dutc/ Disease Economics7 Surve4 and 5onsolidationE) <=ford "conomic Papers *=7 *%+-$ . Engle) 3... and 5.C.J. Kranger !1+$7#) 5o integration and Error 5orrection) "conometrica) 'ol. %%) Issue 2) pages 2%1-27=. 3aAana) S. !1++%#) Industrial .elations in Nigeria7 ;/eor4 and 3eatures. S-3aAana "ublis/ers !Jagos Nigeria#. 3it?gerald) E. '. @. and K. "erosino !1++%#) R;rade Jiberalisation) Emplo4ment and Cages7 a 5ritical Bpproac/E) ;ueen "li>abeth +ouse 9or,ing Papers) No. $7. &<ford7 5entro Studi Juca DEBgliano. 3ofana) N. 3. !2 1#) Emplo4ment and Economic Krowt/ in t/e 5ote dSIvoire7 Bn Bnal4sis of Structural 2#) RBn Blternative Interpretation of t/e .esource 5urse7 ;/eor4 and "olic4 Determinants. African Development 'an, /evie!1 +$-112. >ausman) .. and .. .igobon !2 .esearc/. >ussain) -. N. and 5. Nadol !1++7#) GEmplo4ment) Krowt/ and t/e Demand SideH7 ;/e 5ase of some Bfrican 5ountries. "conomic /evie! :ournal. 'ol. 12) pp 1*(-1%2 >ill) S.) -. Jes/er and >. @. Nordas !2 $#) R;rade and Jabour -ar1et BdAustmentsE) <"3D #rade Policy 9or,ing Papers) No. =(. "aris7 &rgani?ation for Economic 5o-operation and Development. ImplicationsE) $'"/ 9or,ing Paper No. +(2(. 5ambridge) -B7 National 0ureau of Economic # R.ent See1ing and .esource 0oomsE) :ournal of Development "conomics =17 =#) 3ontemporary Dimensions of 4nemployment Problem in $igeria& A Special 3hallenge 4nder the $ational "conomic "mpo!erment and Development Strategy. ;/e Nigerian

%7

Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* I4o/a) -.B. !1+7$#) G;/e .elation between Emplo4ment and Krowt/ in Developing 5ountries7 ;/e Econometric Bnal4sisH. Social and "conomic Studies1 -arc/. I4o/a) -.B. !2 2#) .acroeconomics1 #heory and Policy. 0enin 5it4) -are/ publis/ers. @e4nes) J.-. !1+*=#) #he General #heory of "mployment1 0nterest and .oney. -acmillan 5ambridge ,niversit4 "ress) Jondon. Jen1ins) .. &. and @. Sen !2 =#) RInternational ;rade and -anufacturing Emplo4ment in t/e Sout/7 3our 5ountr4 5ase-studiesE) <=ford Development Studies *(!*#7 2++-*22. @areem) 3. &. !2 1 #) G;rade 3lows and Emplo4ment &utcomes in NigeriaH 9or,ing paper) ,niversit4 of Ibadan. @ris/na) ".) D. -itra) and 5. 5/ino4 !2 1#) R;rade Jiberali?ation and Jabour Demand Elasticities7 Evidence from ;ur1e4E) :ournal of 0nternational "conomics %%7 *+1-( +. @rugman) ". !ed.# !1+$=# Strategic #rade Policy and the $e! 0nternational "conomics. 5ambridge) -B.7 ;/e -I; "ress. Jall) S. !2 (#) R;/e Emplo4ment Impact of Klobali?ation in Developing 5ountriesS) in E. Jee and -. 'ivarelli !eds# 4nderstanding Globali>ation1 "mployment and Poverty .eduction pp. 7*-1 1. New Mor17 "algrave -acmillan. Jee) E. and -. 'ivarelli !2 "algrave -acmillan. -esserlin) ". B. !1++%#) R;/e Impact of ;rade and 3oreign Direct Investment on Jabour -ar1ets7 ;/e 3renc/ 5aseE) &E5D Jobs Stud4 Cor1ing "apers) No. +. "aris7 &rganisation for Economic 5ooperation and Development. -ilner) 5. and ". Crig/t !1++$#) R-odeling Jabour -ar1et BdAustment to ;rade Jiberali?ation in an Industrialising Econom4E) #he "conomic :ournal 1 $7 % +-2$. -orawc?4Ts1i) .. and @. Cac/ !2 (#) RDoes "olis/ 3oreign ;rade Impact Emplo4mentI Bn Empirical Investigation in J. ;argals1i !ed.# "ntrepreneurship1 "mployment and 'eyond 2??%1 pp. %%-==. @ra1ow7 5racow ,niversit4 of Economics. -ussa) -. !1+7$# RD4namic BdAustment in t/e >ec1sc/erU&/linUSamuelson -odelE) :ournal of Political "conomy $=!%#7 77%-7+1 -4tnt) >.;.B) !1+%$#) R;/e 5lassical ;/eor4 of International ;rade and t/e ,nderdeveloped 5ountriesE) "conomic :ournal =$!27 #7 *17-*7. National 0ureau of Statistics !2 1 #) Statistical $e!s& (abour 5orce Sample Survey1 BbuAa Nigeria Na4lor) .. !1++7#) RInternational ;rade and Economic Integration w/en Jabour -ar1ets are Kenerall4 ,nioni?edE) "uropean "conomic /evie! (27 12%1-=7 &badan -.I. and &dusola B.3. !2 2#) Productivity and 4nemployment in $igeria. National 5entre for Economic -anagement and Bdministration !N5E-B#) Ibadan. &1igbo) ".N.5. !1+$=#) G;/eoretical and -et/odological Issues .elating to ,nemplo4ment in Nigeria7 Bnnual 5onference "roceedings of t/e Nigeria Economic Societ4) @aduna) -a4 1*-17. &1une4e ".B. et al !2 t/e 2 1#) Environmental Impact of ;rade Jiberali?ation7 ;/e case of NigeriaEs 5ocoa subsector. In7 $atural /esource 4se1 #he "nvironment and Sustainable Development. Selected "apers "resented at 1 Bnnual 5onference U ;/e Nigerian Economic Societ4 pp. 1(7-17(. &lomola) B. S. !1++%# GSource of Krowt/ and "erformance ;rend in NigeriaEs Bgriculture 1+= -1++2H. In Proceeding of a 9or,shop on $igeria /esearch1 Policy1 Planning and 0mplementation "=perience and /elevance to Development1 Cinroc1 International Ibadan Nigeria .attso J. and .. ;orvi1 !1++$#) RPimbabwean ;rade Jiberali?ation7 E< "ost EvaluationH) 3ambridge :ournal of "conomics) 227 *2%-*(=. (#) 4nderstanding Globali>ation1 "mployment and Poverty /eduction. New Mor17

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Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* .odri1) D. !1++=#) RJabour Standards in International ;rade7 Do ;/e4 -atter and C/at Do Ce Do about ;/emIE in .. Jawrence et al.) !eds# "merging Agenda for Global #rade& +igh Sta,es for Developing 3ountries1 c/apter 2. Cas/ington) D.5.7 &verseas Development 5ouncil. .oss) -.J. !1+++#) R;/e "olitical Econom4 of t/e .esource 5urseE) 9orld Politics %1!2#7 2+7-*22. Sac/s) J. D. and B. -. Carners !1+++#) R;/e 0ig "us/) Natural .esource 0ooms and Krowt/E) :ournal of Development "conomics %+7 (*-7=. Sen) @. !2 $#) RInternational ;rade and -anufacturing Emplo4ment &utcomes in India) B 5omparative Stud4E) ,N-CIDE. Cor1ing .esearc/ "aper No. $7. >elsin1i7 Corld Institute for Development Economic .esearc/. Slaug/ter) -. J. !2 1#) RInternational ;rade and Jabour Demand ElasticitiesE) :ournal of 0nternational "conomics %(7 27-%=. ;/irwall !1++7#) G-acroeconomic Issues from a @e4nesian "erspectiveH7 Selected "ssays) 'ol. 2) !Edward Elgar) 1++7# pp. *7(. ,mo) J.,. !1++%#) G3ull Emplo4ment Implications of Education Investment in 5ontemporar4 Nigeria GCorld 0an1 !1+++#. 9orld Development indicators1 Cas/ington) D.5. Corld 0an1. Corld ;rade &rgani?ation !2 =#) 0nternational #rade Statistics. Keneva7 C;&

BI#G"A.5( %r %a<id $-#"$7 Dr D. 4moru lectures at t/e 0enson Ida/osa ,niversit4) Nigeria. >e owns various publications in $ational and 0nternational :ournals in Social @ .anagement Sciences. >e /olds '. Sc1 .. Sc and Ph. D degrees in economics in Nigeria. >e speciali?es on Bpplied Econometrics) -onetar4 and >ealt/ Economics wit/ special interest in Bpplied Statistics. A..EN%I!ES Appendi= A1: Bounds "esults .egressand7 Jog!KKD"# Panel A: Long-Run Estimates /egressor(s) 3onstant (og (GGDP* ) (og (".P#* ) (og (3A4#* ) (og (P"6P* ) (og (G355* ) Panel B: Short-Run Estimates 3oefficient (t*statistics) -.?ABC (2B.D?B) ?.?2DAC ( %.-%D) ?.E2DC (-.DD2) *?.??2 (*?.22E) .?B2CCC (2.AAA) .22E (B.DBD)

(og (GGDP)
%+

?.22-CCC

Journal of Economics and Sustainable Development ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* (2.DEE)

www.iiste.org

(og (GGDP* ) (og (".P#* ) (og (".P#*2) (og (P"6P* ) (og (P"6P*2) (og (G355* ) (og (G355*2)
Goodness0of0fit -easures / 1 Adjusted /21 5*statistic Sum of S)uared /esiduals Standard "rror of /egression %iagnostic Statistical !hec:ing :ac)ue*'erra /amsey*/eset (.(S3) 'reusch Godfrey A/3+ #est Statistic 9hite #est Statistic
2

?.BBDC (-.?E2) ?.-2DCCC (2.2BB) ?.222CCC (2.EBD) ?.2-( .-B2) ?.2--CCC (2.DB2) ?.DAEC (2.22D) .?D2 (A.-DD) ?.DE%1?.D2B1 B.AAE ?.??DD .?222 .DDE2 H?.??2EI .?2BB H?.22BBI .?DD2 H?.B2A2I ?.2DD2 H?.%2DDI ?.2--D H?.%%BEI

$ote& CCC1 CC denotes statistical significance at the F and BFlevels. 5igures in ( ) and H I s)uare parentheses are the t and probability values of significance respectively

Appendi= A&: Bound 'esting Approach to !o0integration Jevel of Significance ( F) F SignificanceC BF SignificanceC2 ?F SignificanceC
?

5ritical 'alue

(o!er %.G2.ED 2.-B

4pper B.?D -.? %.B2

3omputed 5*statistic: 6.555CCC Note: critical values are cited from Pesaran et al. (2?? )1 ;able 5I !iii#) 5ase1117 ,nrestricted intercept and no trend. .efers to t/e number of estimated coefficients and VVV denotes significance at 1L level

Journal of Economics and Sustainable Development ISSN 2222-17 !"aper# ISSN 2222-2$%% !&nline# 'ol.() No.%) 2 1* Appendi= A1: )ong0"un Elasticity of Economic Growth with respect to Employment in Nigeria 'ariable (og (".P#) Jong-run Elasticit4 ?.BDECCC

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$ote& CCC denotes statistical significance of the computed long*run elasticity at the BF level.

Appendi= A4: Short0"un !ausality "esults from the 3ald Statistical 5ypothesis 'est 'ariable!s# ;est Statistic !s# B.2BBC H?.????I 2.2BBC H?.????I 2.BD2CCC H?.?-2DI %.??2CCC H?.????I Note7 V) VVV denotes statistical significance at t/e 1 percent and % percent levels. 3igures in parent/esis are t/e marginal significance values 6p-value!s#:

(og (".P#) (og (3A4#) (og (G355) (og (P"6P)

=1

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