Unemployment: A Missing Link

Abstract

Developing countries like Pakistan face a host of economic problems in the form of stagnant exports, low economic growth, inadequate private investment, and inefficient utilization of foreign direct investment. Given these problems, we have examined macroeconomic factors impact on unemployment in Pakistan from 1967 to 2018. We also tested the proposed hypotheses through “VAR, fully modified least squares, and Granger causality tests.” Our results suggest that exports did not stimulate jobs in Pakistan. Perhaps, Pakistan needs to diversify its exports by focusing on non-conventional value-added goods. The results also indicate that although FDI and government expenditures have created jobs, they are below expectations. Although we found that private investment has helped job creation, the effect is small compared to other developing countries. Furthermore, we find that macroeconomic factors have had little impact on unemployment in the long run.