Determinants of Unemployment in Namibia

Transcription

1 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 Deerminns of Unemploymen in Nmibi Joel Hinunye Ei (Corresponding uhor) School of Business nd Economics, Monsh Universiy (Souh Africn Cmpus) P/B X60, Roodepoor, 1725, Souh Afric Tel: E-mil: or Johnnes M. Ashipl Unied Nions Developmen Progrmme (UNDP) Nmibi, Prive Bg 13329, Windhoek, Nmibi E-mil: The reserch is finnced by Unied Nions Developmen Progrmme Nmibi Absrc This sudy invesiges he cuses of unemploymen in Nmibi for he period 1971 o The nlysis is crried ou hrough n exensive review of he relevn lierure, microeconomic nd mcroeconomic models of unemploymen. The unemploymen model (wih mcroeconomic vribles) is esimed using he Engle-Grnger wo-sep economeric procedure. The resuls reveled h here is negive relionship beween unemploymen nd inflion in Nmibi. Unemploymen responds posiively if cul oupu is below poenil oupu, nd if wges increse. An increse in invesmen cuses unemploymen o decrese significnly. The resuls provide evidence h he Phillips curve holds for Nmibi nd unemploymen cn be reduced by incresing ggrege demnd. I is imporn o increse oupu up o he counry s poenil, nd here is need for wge flexibiliy (workers need o reduce heir wge demnds) in order o decrese unemploymen in Nmibi. Incresing invesmen will reduce unemploymen significnly. Keywords: Unemploymen, Coinegrion, Uni roo, Oupu gp, Invesmen, Nmibi 1. Inroducion Nmibi hs enjoyed bou 20 yers of pece nd sbiliy. However, he rise in unemploymen re in Nmibi hs he poenil o cuse serious hre o he previling pece nd sbiliy in he counry. In generl, unemploymen hs significn impc on povery, homelessness nd ffecs fmily cohesion. I cuses hopelessness nd oher socil evils such s crime, violence, brek up of fmilies, lcoholism nd prosiuion. The 2004 Lbour Force Survey of Nmibi indices h h unemploymen in Nmibi is high even by developing counry s sndrd. The nrrow definiion of unemploymen which includes only people who re unemployed nd sill looking for jobs is 21.9 percen. The brod definiion of unemploymen which includes lso he people who re unemployed nd no looking for jobs pus unemploymen re 36.7 percen. Unemploymen re for women is higher hn he one for men, bu he youh (minly school levers) re he mos ffeced. Youh unemploymen (youh in Nmibi is defined s people beween he ge of 15 nd 30) is mos socio-economic problem nd hs he poenil o cuse socil disconen. Before Nmibi s independence in 1990, blck people (minly youh) hd no rel expecion of being ble o live good life. This hs been chnged fer independence nd led o people o believe h hey cn ge jobs nd hve good life, bu he economy is no genering enough job opporuniies. Nmibi hs chieved mcroeconomic sbiliy fer independence, bu his ws no sufficien o reduce unemploymen. The economy grew by 4.6 percen beween 2000 nd 2005 nd inflion of single digi ws chieved during he sme period. The governmen hs lso pursued pruden fiscl policy, minined well-developed infrsrucure nd srong legl nd regulory environmen. Despie hese chievemens, unemploymen re coninued o rise. This suggess h chieving mcroeconomic sbiliy is no sufficien o cree he much-needed jobs nd reduce unemploymen. Sisics from he vrious issues of he Lbour force indice h employmen grew by less hn or one percen per yer during he period 1992 o This is in conrs o he nnul growh of he lbour force of 3 percen during he sme period. This resuled in n increse in unemploymen re (nrrowly defined) from 19 percen in 1992 o 21.9 percen in The low growh in 92

2 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 jobs creed hs resuled in rising unemploymen. Alhough he unemploymen re in Nmibi is comprble o oher SACU (Souhern Africn Cusoms Union) member counries such s Souh Afric nd Lesoho, i is bove number of Africn peers. Using he nrrow definiion of unemploymen in Nmibi is higher hn in oher Africn counries (such s Boswn, Tunisi, Egyp, Muriius nd Cmeroon) s shown in Tble 1. Gomb II (2007) suggesed h he 2004 sisics on unemploymen in Nmibi should be inerpreed wih cuion becuse he Nmibi Household Income nd Expendiure Survey of 2004 found h Nmibins were beer off hn hey were in 1994 nd h Nmibi ws on rck o mee he Unied Nions Millennium Developmen Gols by This Survey lso found h he proporion of households living in severe povery declined from 8.7 percen o 3.9 percen nd he Gini coefficien declined from 0.7 o 0.6. These findings conrdic he Lbour Force Survey of 2004 nd herefore prdoxicl. There is generl consensus h increse in unemploymen is posiively reled o increse in povery. This conrdicion should be ken ino ccoun when nlysing unemploymen sisics in Nmibi. The Nionl Developmen Plns which re he implemening medium-erm plns for he nionl long-erm gol Vision 2030 re cler on he issue of unemploymen. The governmen policy is imed romoion of growh, incresing employmen nd llevie povery, s well s reducion of unequl disribuion of income. The key insrumens for chieving hese objecives re high invesmen in educion, helh, pension sysem nd oher socil services. Mesures hve lso been ken by he governmen o cree employmen nd ddress lbour mrke inequliies. Nmibi follows mrke-oriened nd open economic policy becuse i cknowledges h unemploymen nd povery cn be reduced by chieving high economic growh. Under such siuion of high economic growh, i could be expeced h employmen will increse, bu his hs no been he cse. Unemploymen coninued o increse. This rise n ineresing quesion on wh re fcors deermining unemploymen in Nmibi. In ligh of he bove, he objecive of his sudy is o invesige he deerminns of unemploymen in Nmibi. The sudy pins icure of he disribuion of unemploymen in Nmibi. The invesigion is conduced hrough review of relevn lierure, microeconomic nd mcroeconomic models of unemploymen. I uses n economeric model o deermine mcroeconomic fcors which drive unemploymen in Nmibi. The res of he sudy is orgnised s follows. Secion 2 discusses he feures of he unemployed in Nmibi. Secion 3 reviews he lierure on he deerminns of unemploymen in Nmibi. Secion 4 presens he model for Nmibi. Secion 5 discusses he d nd esimion echnique, while Secion 6 presens he resuls. Secion 7 concludes. 2. Feures of he unemployed in Nmibi Unemploymen is defined ccording o inernionl sisicl definiion s people who re wihou work, vilble o work nd cively seeking for work. This is clled sric or nrrow definiion of unemploymen. This nrrow definiion excludes mny unemployed people who re wihou job nd re vilble o work bu no cively looking for employmen from he lbour force. According o Odd (2008) he inernionl sisicl sndrds doped in 1982 inroduced rovision which llowed he nrrow definiion of unemploymen o be dropped in siuions where he convenionl mens of seeking work re of limied relevnce where he lbour mrke is lrgely unorgnised, lbour bsorpion he ime is indeque or where mos people re self-employed. The brod definiion of unemploymen is recommended becuse i includes ll people wihou job, who re vilble o work even if hey re no cively looking for employmen. The brod definiion lwys resuls in high unemploymen hn he sric or nrrow definiion of unemploymen. The brod definiion of unemploymen is suppored by lbour mrke condiions in Nmibi. Odd (2008) rgues here re limied convenionl mens of looking for jobs becuse he mjoriy of Nmibins live in he rurl res. Since he mjoriy of he populion lives in he rurl res, hey hve limied ccess o prin nd elecronic medi. The ypes of jobs h cn be done by he mjoriy of people in he rurl res re no dverised in he medi. Generlly, here is no mrke plce in he rurl res (where mjoriy of he populion live) of Nmibi where people who re looking for jobs nd employers cn mee. This resuled in siuion in he rurl res where people who re unemployed nd re vilble o work, bu re no cively looking for work becuse hey do no know where o look for work. There is lso roblem of underemploymen in Nmibi such heople who consider hemselves employed hve low produciviy nd i is no esy o disinguish hem from hose h re unemployed. Tble 2 nd Tble 3 presen he lbour force, employmen nd unemploymen for he using he sric nd brod definiions of unemploymen. The wo definiions of unemploymen yield differen res of unemploymen. Tble 2 which shows h when using he nrrow definiion of unemploymen, he 1991 NPHC, 1993/1994 NHIES, 1997 NLFS, 2000, NLFS Published by Cndin Cener of Science nd Educion 93

3 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 nd he 2004 NLFS produced unemploymen res 19.1, 19.4, 19.5, 20.2 nd 21.9 percens. Tble 2 shows h he ol number of people employed decresed from in 1991 o in I hen incresed o in 1997 nd in 2000 before decresing o in Odd (2008) ribues he decrese in he number of people employed beween 1991 nd 1994 o he emigrion of people who hough h Souh Afric ws beer plce o live fer Nmibi gined poliicl independence in These people minined close links wih heir fmilies in Souh Afric. Souh Afric ws rnsformed o democrcy in 1994, nd some people who migred o Souh Afric cme bck o Nmibi. Hence he big flucuions in he number of people employed beween 1991 nd 1997 (Odd, 2008, p. 53). The increse in unemploymen in 2004 suggess h here re some fcors in Nmibi which mkes he economy unble o bsorb lrge number of he unemployed people. This could be ribued o he fc h Nmibi hs smll mnufcuring bse, nd his mkes he economy unble o bsorb he mjoriy of he unemployed people. The nex secions review boh microeconomic nd mcroeconomic deerminns of unemploymen. 3. Lierure Review on Deerminns of Unemploymen There re vrious sudies h invesiged he deerminns of unemploymen. Some sudies nlysed he deerminns of unemploymen from microeconomic perspecive, while ohers invesiged he mcroeconomic deerminns of unemploymen in boh developed nd developing counries. There re lso differen heoreicl models h re relevn for he invesigion of he deerminns of unemploymen. Monernsen (1970) nd Lippmn nd McCll (1976) presened commonly chosen frmework job serch model. This model ses h when people become unemployed, he expeced durion of heir unemploymen depends on probbiliy of receiving job offers nd cceping he offers. The job offer is deermined by fcors such s educion, skill, experience nd locl demnd condiion, ll which mke specific person rcive o employers. This model ssumes h he probbiliy h n individul ccep offer of employmen depends on he individul s minimum ccepble wge. The minimum ccepble wge is clled reservion wge nd is deermined by cos of looking for job, unemploymen income, expeced disribuion of wge offers nd probbiliy of receiving subsequen job offers. Foley (1997) used informion conined in nionlly represenive longiudinl survey o nlyse unemploymen durion in Russi during he erly yers of rnsiion. The nlysis ws done by using compeing-risks, discree-ime wiing model ugmened o incorpore unobserved heerogeneiy. This ws done o nlyse wheher he role of demogrphic chrcerisics, lernive income suppor nd locl demnd condiions in explining unemploymen. The resuls indice h mrried women re found o experience significnly longer unemploymen compred o heir mle counerpr. Older individuls expec o be unemployed longer hn younger individuls. Highly skilled or educed individuls hve very low unemploymen re compred o hose wihou educion or low skilled individuls. Kingdon nd Knigh (2001) sudied he unemploymen in Souh Afric using he probi model. The sudy ws conduced using wo nionl household surveys for he mid-1990s. The resuls indice h unemploymen in Souh Afric is deermined by mong ohers, rce, educion, ge, gender, home ownership, locion. Bhor (2007) nlysed number of lbour economic nd socil choice heories nd idenified fcors or common vribles h deermine he chnce of somebody o be employed or no. A number of vribles from economic nd socil heories h deermine unemploymen re (Bhor, 2007): Economic heory ses h more educion resuls in greer likelihood of employmen. In mny middle nd low income counries here is shorge of highly educed individul nd his resul in high unemploymen. Alhough here is scrciy of highly-educed people mny Africn counries (including Nmibi), Egyp hs surplus of highly-educed people who find i difficul o ge jobs. Despie h, here hs been shif wy from unskilled/semi-skilled lbour owrds more skilled lbour in low nd middle income counries. Employmen is ffeced by choices in how o uilise hours in he dy. This is reled o household responsibiliies such s feching wer, wood, childcre, cre of he elderly nd leisure civiies. Gender nd culure hve n impc on employmen. Women re ofen more likely o be home-mkers dependen on he mle of he household. This depends significnly on who is he hed of he household or fmily. The hed of he household is ofen he one who is working nd more likely o be he bredwinner. The issue of rce lso ply role in mny developed nd developing counries. In sndrd neo-clssicl lbour heory, i is rgued h high unemploymen re is cused by high wge. This mens h if here is involunry unemploymen, he rel wge will fll nd unemployed people will find job lower wge. The decrese in rel wge implies lower coss o employers nd i encourges hem o employ more workers. 94

4 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 The composiion of he household deermines unemploymen. A household h hs mny eengers nd bbies cn hve impc on he likelihood of employmen by cing s n incenive o find employmen. There is correlion beween mril sus nd employmen in boh developed nd developing counries. I is rgued h once erson is mrried, here is economic nd psychologicl incenive o find employmen. Generlly, i is viewed h mrried men re less risky employees becuse hey hve seled down. However, his is highly debble becuse someone my be employed in he firs plce nd his rcs poenil prners o him/her. There is need o know wh hppened in he firs plce. Anoher fcor explining unemploymen is welh of he fmily or household. People from poor fmilies hve lile or no money o cively look for jobs nd his cuses geogrphicl immobiliy o res where jobs re loced. There re lso sudies which invesiges he mcroeconomic deerminns of unemploymen. Vldkhni (2003) invesiged he cuses of unemploymen in Irn. The sudy specified n equion for he unemploymen re in Irn. The equion ws specified s follows: lnun ln P lny 0 lnun ln D 6 2 lny p 3 lnuncer 4 ln I, (1) ln Y ln Y is mesure of oupu gp where UN is unemploymen re, P denoes consumer price index, p ( Y nd Y re cul nd poenil oupu), UNCER is roxy for economic unceriny, I is he ol invesmen D represens dummy vribles nd is he residul or error erm. The error erm or residul represens oher vribles h cn influence unemploymen bu re no included in he model. Theoreicl jusificion nd sign expecions of he vribles in Equion (1) re s follows. The consumer price index is included in he equion becuse here is heoreicl relionship beween inflion nd unemploymen re. The hypohesis is h here is rde-off beween unemploymen nd inflion (Phillips curve). The coefficien of he consumer price index is expeced o be negive if he Phillips curve hypohesis holds. If i does no hold, he coefficien will be posiive nd his is referred o s sgflion. Sgflion is siuion where unemploymen nd inflion re moving in he sme direcion. If he Phillips curve holds i mens h n increse in inflion cuses unemploymen o decrese nd vice vers. On he oher hnd, if he Phillips curve does no hold, i suggess h n increse in inflion resuls in higher unemploymen nd his is sgflion siuion. As Fhrer nd Pese (1993) nd Vldkhni (2005) sed, mesure of oupu gp is included in he equion, where unemploymen is specified s funcion of he gp beween cul nd poenil oupu. I is expeced h if cul oupu become less hn he poenil oupu, unemploymen should increse nd his mens h 0. 2 The coefficien of oupu gp is expeced o be posiive indicing h n increse in his vrible resuls in higher unemploymen. A mesure of unceriny is included in he unemploymen equion becuse he economic environmen cn be volile nd dversely ffecs unemploymen. Mesuring economic unceriny is no esy, nd Vldkhni (2003) used he difference beween he blck mrke exchnge re nd he officil exchnge re or blck mrke premium s mesure of unceriny. I is expeced h n increse in economic unceriny cuses unemploymen o rise. This mens h osiive relionship or 3 0 is expeced. The growh in ol invesmen is included in he equion s one of he min deerminns of unemploymen. I is expeced h n increse in invesmen cn cuse decrese in unemploymen re since unemploymen is srucurl. 0. As Vldkhni ses, osiive growh in rel invesmen cn reduce unemploymen, nd h mens 4 Adpive expecion is dded o he unemploymen equion by including he lgged vlue of he unemploymen re. Vldkhni esimed Equion (1) for he period 1968 o 2000 by using he generl o specific economeric echnique nd simulneous equion o exmine he mjor deerminns of unemploymen in Irn. The resuls reveled h here exiss rde-off beween inflion nd unemploymen, lhough persisen nd soring inflion cn led o currency depreciion which worsens unemploymen. If cul oupu is less hn he poenil oupu, unemploymen will increse. Increse in invesmen reduces unemploymen, while increse in economic unceriny cuse unemploymen o increse. Published by Cndin Cener of Science nd Educion 95

5 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 Wkeford (2004) invesiged he relionship beween verge rel wges, produciviy nd employmen in Souh Afric s mnufcuring secor. Since Souh Afric hs lrge number of unemployed workers, observed employmen my be ken o reflec he demnd for lbour rher hn he supply of lbour. The demnd for workers, wihin he neoclssicl frmework is ypiclly derived from roducion funcion. I depends on fcor prices (negively on wges nd posiively on he cos of cpil). I lso depends posiively on oupu. Wkeford subsiued lbour produciviy insed of oupu. The impc of lbour produciviy on oupu cn be posiive or negive. An increse in produciviy cn reduce he demnd for workers, s he exising lbour is more efficien. A rise in produciviy could impc posiively on he employmen hrough n oupu effec which increse demnd for lbour. Monsiriois (2006) explored he mcroeconomic deerminns of UK regionl unemploymen. The sudy drws on he Keynesin nd moneris explnions of unemploymen. I lso elbores on how he wo min heoreicl pproches perceive he role of price, cpil ccumulion, mcroeconomic shocks nd lbour mrke rigidiies in he deerminion of unemploymen. In he Keynesin pproch, he relionship beween unemploymen nd is deerminns is specified s follows: U 0 1U 1 2K, (2) where U, K, re unemploymen, re of cpil growh (ccumulion), nd error erm. Equion (2) ses h he level of unemploymen depends on ps unemploymen, nd he re of cpil growh. Monsiriois rgued h lhough he specificion in Equion (2) does no llow for he role of lbour mrke rigidiies in deermining unemploymen, ossible relion beween he wo vribles cn be provided by ssuming h rigidiies influence he impc h cpil growh hs on unemploymen. I is ssumed h if he lbour mrke is more rigid, cpil growh will hve sronger impc on unemploymen reducion. If he lbour mrke is flexible, he response of unemploymen o chnge in cpil ccumulion will be lile. This hs he following implicion: U U K ( K F ) (3) F nd 22 As Monsiriois sed, F is mesure of lbour mrke flexibiliy. Equion (3) ses h 21 0 nd 0, which reflecs he ssumpion h cpil growh decreses unemploymen, bu by lile when he lbour mrke is flexible. According o he moneris model, he re of cpil growh does no ply role in unemploymen deerminion. According o Monsiriois, he cul unemploymen depends on he srucurl re of unemploymen, U*, cyclicl fcors nd shocks h re exogenous. Unemploymen cn be formlly expressed s funcion of rigidiies in he lbour mrke. The cyclicl fcors influences nd mcroeconomic shocks re pproximed wih chnge in inflion re ( ( INF ) nd produciviy growh re ( PROD). The moneris model cn formlly be presened s: U 1U 1 2INF 3PROD4 F 0 (4) where is he error erm. Equion (4) highlighs he impc of he inercion beween mcroeconomic shocks nd lbour mrke insiuions on unemploymen nd unemploymen persisence. Furher deils on he Keynesin nd moneris models or pproches o unemploymen re presened in Monsiriois (2006: 13-18). In n emp o undersnd Souh Afric s economic puzzles, Rodrick (2006) explined he cuse of unemploymen in Souh Afric. According o Rodrick, high unemploymen resuled from he shrinkge of he non-minerl rdble secor since he erly 1990s. The weknesses of he expor-oriened mnufcuring deprived Souh Afric, he growh opporuniies nd resuled in n increse in unemploymen. Non-minerl rdbles especilly mnufcuring re he key for growh nd employmen in Souh Afric. Expor-oriened sregy h increse he relive profibiliy of producing rdbles for world mrkes will cree economic growh by pulling lbour ino producive civiies where heir mrginl producs is very higher. Trdbles re low skill inensive in Souh Afric nd could help he counry o genere employmen. Anoher sudy on he deerminns of unemploymen in Souh Afric ws conduced by Schoemn e l. (2008). This sudy esimed unemploymen s funcion of ol fixed cpil sock, unionision s percen of forml employmen, rel effecive exchnge re, crude oil price nd bnkers ccepnce re. Specificlly, he equion ws specified s follows: 96

6 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 U f ( K, UNION, REER, CRUDE, BA) (5) Where U, K, UNION, REER, CRUDE, BA re unemploymen re, ol fixed cpil sock, unionision s percenge of forml employmen, rel effecive exchnge re, crude oil price nd bnkers ccepnce re. The resuls reveled h increse in cpil cuses reducion in unemploymen nd his is ssocied wih he heory h incresed invesmen crees jobs. Incresed unionision nd crude oil price, ppreciion of he rel exchnge, nd sric monery policy led o rise in unemploymen re. 4. The Model for Nmibi Following review of he lierure in Secion 3, his sudy considers mcroeconomic model (model wih mcroeconomic vribles) for esiming unemploymen in Nmibi. Microeconomic models re no pplied in his sudy becuse of d limiions. I pplies he Vldkhni (2003) model o Nmibi. Mny mcroeconomic sudies esimed he employmen equion insed of unemploymen equion. The dvnge of he Vldkhni model is h i esimes unemploymen equion insed of he employmen equion s done by some sudies. The d for vribles used in he Vldkhni model re vilble in Nmibi. The model is slighly djused o fi he Nmibin siuion. I will be esimed s follows: lnu 0 1 ln P 2[lnY lny ] 3 ln RW 4 ln I 5 ln PROD (6) where RW nd PROD re rel wges nd produciviy. All oher vribles re s defined before. Since vrious issues of Nmibi Lbour Force Survey indiced h more hn 80 percen of he unemployed people hve very low educion, i would be pproprie o include vrible h represens educion. Th vrible is no included in his model becuse of lck of d for ll vribles h cn be used s proxy for educion. This sudy cknowledges h unionision of workers is n imporn vrible, bu i is no included in he model becuse of d unvilbiliy. 5. D nd Esimion Technique 5.1 D sources nd Vrible Definiion The sudy uses nnul d nd esimion covers he period 1971 o The d re sourced from Cornwell e l. (1991), he Nionl Plnning Commission (1999; 2006; 2008), Hrmnn (1988), Bnk of Nmibi (1991; 2004; 2006; 2007) nd Minisry of Lbour nd Socil Welfre (1997; 2000; 2004). Unemploymen is defined s he difference beween he ol lbour force nd ol employmen. Unemploymen re is hen ken s he ol unemploymen s percen of he ol lbour force. Prices re proxied by he consumer price index 1995 bse yer. Poenil oupu is compued by using he Hodrick nd Presco (1997) filer (lso clled HP filer). The HP filer is widely used in he lierure o decompose d ino rend nd cycle. I is mhemicl ool used in mcroeconomics, minly in he heory of rel cycle. I is used o ge smoohed non-liner represenion of he d or series (one which is more sensiive o long-erm hn o flucuions in he shor-erm). A muliplier is modified o chieve djusmen of he sensiiviy of he rend o shor-erm flucuions. I is lso widely used o p clcule poenil oupu from cul oupu. The HP filer esimes Y from Y by minimising he vrince p of Y round Y. As Vldkhni (2003) ses, he HP filer ses he poenil oupu wih he im of minimising he loss funcion s follows: T 2 T 1 p p p p L ( Y ) ( ) ( Y Y Y Y Y 1 Where is smoohing weigh on poenil oupu nd T is he size of he smple. Hodrick nd Prescco (1997) sugges h he smoohing weigh should be 100 for nnul d. Therefore in his sudy, he smoohing weigh is 100. The poenil oupu is compued using hree mesures of oupu. These re ol rel GDP, rel GDP of he secondry secor (he secondry secor in Nmibi includes mnufcuring, elecriciy nd wer, nd consrucion) nd rel mnufcuring GDP. Rel wge is compued s remunerion or compension of employees defled by he consumer price index. Gross domesic fixed cpil formion is ken s mesure of invesmen, while produciviy is compued s rel GDP divided by he ol employmen. Unceriny is mesured s he difference beween equilibrium exchnge re nd cul exchnge re wih respec o he US$. The HP filer ws used o compue he equilibrium exchnge re. Published by Cndin Cener of Science nd Educion 97

7 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober Esimion Technique The vilbiliy of d deermines he pproprie economeric echnique o be used. The number of mehods h would be fesible is limied becuse his sudy uses limied d se or few observions. Since mos economic vribles re nonsionry (hey conin uni roos), he sudy uses coinegrion mehodology o nlyse he d. When vribles re nonsionry, rdiionl Ordinry Les Squres (OLS) esimion mehod is no sufficien nd cuses spurious regression resuls. Spurious regression presens resuls h re nonsensicl. Despie is poenil defecs, he Engle-Grnger wo seps esimion echnique is pplied in his sudy. This echnique involves he deerminion of long-run coinegrion relionship by esing for sionriy of he residuls from he long-run equion. Sionriy of he residuls is esed using he Augmened Dickey-Fuller (ADF) es sisic. Rejecion of he null of nonsionriy (uni roo) mens h he vribles in he equion re coinegred. If here is ny nonsionriy, i will be correced for by mens of shor-erm error correcion model (ECM). This sudy cknowledges h he Engle-Grnger wo sep esimion echnique hs poenil weknesses. I ssumes h here is one coinegring vecor. The oher wekness is h if here is n error in he firs sep, i will be crried over o he second sep of he esimion. This sudy is wre h here re oher esimion echniques h re beer or more powerful hn he Engle-Grnger wo sep echnique. Mulivrie coinegrion echniques such s Johnsen s full informion mximum likelihood re more powerful hn he Engle-Grnger wo sep echnique. However, hese echniques require more d (mny observions). I is imporn o menion h he ADF es sisic hs poenil defecs. This es hs low power nd end o under-rejec he null of uni roo. There re oher ess for uni roos h re more powerful hn ADF es sisic. These ess re Kwikowski-Phillips-Schmid-Shin (KPSS) nd Ng-Perron (NP). KPSS nd NP es sisics lso require more d. I is for hese reson h his sudy pplies he Engle-Grnger wo sep esimion echnique nd ADF es sisic. 6. Empiricl Resuls 6.1 Uni Roo Tes Resuls Uni roo es is he firs sep in he esimion. I involves univrie chrcerisics of he vribles used in he esimed equion. The vribles re esed for sionriy using he ADF es sisic. The resuls re presened in Tble 4. Tble 4 indices h mos vribles conin uni roo (excep mesures oupu gp nd produciviy) or hey re nonsionry in levels. They re I(1) becuse hey become sionry fer firs differences. Consumer price index is nonsionry even in firs difference form. The consumer price index vrible is I(2) becuse i become sionry when differenced wice. 6.2 Esimion Resuls Tble 5 presens he long-run or coinegrion esimion resuls of hree vriions of Equion (6). The second column presens he resuls when GDP gp is compued using ol GDP. The resuls column 3 uses GDP gp genered from he GDP of he secondry secor. The ls column uses GDP gp compued from mnufcuring GDP. The resuls in boh column 2, 3 nd 4 show h n increse in prices cuses unemploymen o decrese. However he resuls in he second nd fourh column show h he coefficien is no sisiclly significn. Column 2 indices h here is significn negive relionship beween inflion nd unemploymen. A one percen increse in inflion cuses unemploymen o decrese by 0.2 percen. This provides evidence h he he Phillips curve hypohesis holds for Nmibi. There is negive relionship beween inflion nd unemploymen in Nmibi. If here is n increse in he inflion re unemploymen will decrese. The coefficien of he oupu gp is posiive in boh columns (2, 3 nd 4) nd sisiclly significn when ol GDP nd secondry secor s GDP re used o compue oupu gp. However, when mnufcuring GDP is used he coefficien becomes sisiclly insignificn lhough i hs he expeced sign. The sisicl insignificnce of GDP gp compued using mnufcuring GDP could be explined by he fc h lbour mrkers in his secor in Nmibi re no flexible. This cn lso be ribued o he fc h he d used in he esimion re obined from differen sources. The resuls indice h if cul oupu is less hn poenil oupu, unemploymen will increse. Column 2 nd 3 indice h nd increse in oupu gp by one percen cuses unemploymen o increse by 1.3 nd 0.8 percen. All esimed models shows h increse in wges re ssocied wih n increse in unemploymen. A one percen increse in wges cuses unemploymen o increse by 0.9, 1.8 nd 1.6 percen. The coefficiens re ll sisiclly significn. This mens h n increse in he cos of lbour is ssocied wih n increse in unemploymen. The resuls re in line wih hose obined by oher sudies such s Ei nd Du Toi (2009). 98

8 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 Increse in invesmen cuses unemploymen o decrese. A one percen increse in invesmen resuls in unemploymen o decrese by 0.4, 0.2 nd 0.4 percen. All he coefficiens re sisiclly significn. This suggess h unemploymen in Nmibi cn be reduced by incresing invesmen. Oher vribles such s produciviy nd ime rend were included in he esimion bu heir coefficiens re no sisiclly significn. These resuls re firly comprble o h of Vldkhni (2003) nd Schoemn e l. (2008). The resuls sugges h unemploymen in Nmibi cn be reduced by incresing invesmen. The residuls from he regressions presened in Tble 5 were esed for sionriy using he ADF sisics nd he resuls reveled h he null hypohesis of no coinegrion is rejeced. This mens h here is coinegrion beween unemploymen nd he explnory vribles. Since he vribles re coinegred for boh models, he nex sep is o esime he ECM. The resuls of he ECM re presened in Tble 6. The dummy vrible for Nmibi s independence in 1990 (DUMIND) is included in he ECM (column 4) o fully explin he shor-run dynmics of he unemploymen funcion. The resuls in Tble 6 indice he explnory vribles re sisiclly significn. The coefficiens of he ECM for boh models re negive nd sisiclly significn. This is n indicion h he dynmics djus owrds equilibrium insed of moving wy from i. Columns 2, 3 nd 4 indice 35, 50 nd 48 percen of disequilibrium re correced every yer. The dignosic ess were performed on he error correcion model nd he resuls showed h he equions re well-specified nd did no viole he Gussin ssumpions or clssicl liner regression ssumpions. The R-squred of more hn 50 percen shows h he regressions re good fi. More hn 50 percen of he vriions in he dependen vrible re explined by he explnory vribles. 7. Conclusion nd Policy Implicions This sudy nlysed nd invesiged he deerminns of unemploymen in Nmibi. The nlysis nd invesigions re conduced hrough review of he relevn lierure nd models. Vrious microeconomic nd mcroeconomic models were reviewed. The microeconomic models were no pplied becuse of d unvilbiliy. The sudy hs chosen mcroeconomic model o invesige fcors h influence unemploymen in Nmibi. The Vldkhni (2003) model ws esimed for Nmibi. The Engle-Grnger wo sep procedure ws used o esime he model for Nmibi. The esimion covered he period 1971 o The resuls indiced h here is evidence of negive relionship beween unemploymen nd inflion. This gives evidence h he Phillips curve holds for Nmibi. This shows h unemploymen in Nmibi cn be reduced by simuling spending (which cuse high inflion). If cul GDP is below poenil GDP, here will be n increse in unemploymen. The oupu gp ws compued using hree mesures of GDP (ol GDP, secondry secor s GDP nd mnufcuring GDP). The resuls show h when ol GDP nd GDP of he secondry secor re used s mesures of oupu gp, he coefficiens re posiive nd sisiclly significn. However, when mnufcuring GDP is used s mesure of oupu he coefficien posiive bu sisiclly insignificn. This mens h lhough oupu of he mnufcuring secor reduces unemploymen, he effec is no significn. This is unexpeced becuse i is generlly cceped n increse in mnufcuring GDP will genere more jobs nd reduce unemploymen significnly. This cn be ribued o inflexible lbour mrke in his secor, nd he fc h he d used in he esimion re obined from differen sources nd hve some inconsisencies (i should be noed h mnufcuring GDP is componen of he secondry secor GDP). Despie h, he resuls sugges h i is imporn for Nmibi o increse is GDP up o is poenil level in order o reduce unemploymen. As expeced, nd increse in wges cuses unemploymen o increse. The coefficiens for ll he vriions of unemploymen models re posiive nd sisiclly significn. This mens h n increse in he cos of lbour cuses unemploymen o increse. This suggess here is need for wge flexibiliy. Employees nd heir rde unions should reduce he effec of heir wge demnd nd help o reduce unemploymen. There is negive relionship beween unemploymen nd invesmen. An increse in invesmen cuses unemploymen o decrese. The coefficien of invesmen is sisiclly significn for ll he vriions of he esimed unemploymen funcion. Invesmen mus be promoed in order o genere jobs for he mjoriy of he unemployed people. A es for coinegrion reveled h he null hypohesis of no coinegrion is rejeced nd his mens h he vribles re coinegred. There is n economic equilibrium relionship beween unemploymen nd he explnory vribles. The ECM resuls indice h he dynmics djus o equilibrium insed of moving wy from i. All he resuls pssed dignosic sisics nd he R-squred of more hn 50 percen indices h he model good fi. Alhough here re some vribles h were no included in he esimed model, fuure sudies should include hese vribles s he d become more vilble. Published by Cndin Cener of Science nd Educion 99

9 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 References Bnk of Nmibi. (1991). Annul Repor. Bnk of Nmibi: Windhoek. Bnk of Nmibi. (2004). Annul Repor. Bnk of Nmibi: Windhoek. Bnk of Nmibi. (2006). Annul Repor. Bnk of Nmibi: Windhoek. Bnk of Nmibi. (2007). Annul Repor. Bnk of Nmibi: Windhoek. Bhor, H. (2007). Unemploymen in Souh Afric: Descripors nd Deerminns. Pper Presened o he Commission on Growh nd Developmen, World Bnk, Wshingon DC. Cornwell, R., Leisner, E., & Eserhuysen, E. (1991). Nmibi 1990: An Africn Insiue Counry Survey. Preori: Africn Insiue of Souh Afric. Ei, J.H., & Du Toi, C.B. (2009). Explining Long-Term Growh in Nmibi. Souh Africn Journl of Economic nd Mngemen Sciences, 12(1), Fhrer, J., & Pese, A. (1993). The Unemploymen Vcncy Relionship in Ausrli. Ausrlin Economic Review, 28, Foley, M.C. (1997). Deerminns of Unemploymen in Russi, Cener Discussion Pper No. 779, Yle Universiy. Gomb II, M. (2007). To Wh Exen do Economic Policies nd Srucurl Heerogeneiies Inhibi he Employmen Absorpive Cpciy of he Nmibin Economy? Pper Presened he NUNW Nionl Symposium on Produciviy nd Employmen, Windhoek. Hrmnn, W.P. (1988). The Role of Mining in he Economy of Souh Wes Afric/Nmibi , Unpublished Mser of Science in Economics Thesis, Universiy of Sellenbosch, Sellenbosch. Hodrick, R, J., & Presco, E.C. (1997). Poswr U.S. Business Cycles: An Empiricl Invesigion. Journl of Money, Credi nd Bnking, 29(1), Kingdon, G., & Knigh, J. (2001). Rce nd he Incidence of Unemploymen in Souh Afric. Cenre for he Sudy of Africn Economies Working Ppers, CSAE WPS/ Lippmn, S., & McCll, J. (1976). The Economics of Job Serch: A Survey. Economic Inquiry, 14, Minisry of Lbour nd Socil Welfre. (1997). Nmibi Lbour Force Survey. Windhoek: Direcore of Lbour Mrke Services. Minisry of Lbour nd Socil Welfre. (2000). Nmibi Lbour Force Survey. Windhoek: Direcore of Lbour Mrke Services. Minisry of Lbour nd Socil Welfre. (2004). Nmibi Lbour Force Survey. Windhoek: Direcore of Lbour Mrke Services. Monsiriois, V. (2006). Mcro-deerminns of UK Regionl Unemploymen nd he Role of Employmen Flexibiliy. EI Working Pper, 01, Europen Insiue. Morensen, D. (1970).Job Serch, he Durion of Unemploymen nd he Phillips Curve. Americn Economic Review, 30, Nionl Plnning Commission. (1999). Nionl Accouns: Windhoek: Cenrl Bureu of Sisics. Nionl Plnning Commission. (2006). Nionl Accouns: Windhoek: Cenrl Bureu of Sisics. Nionl Plnning Commission. (2008). Nionl Accouns: Windhoek: Cenrl Bureu of Sisics. Odd, J.E. (2008). Overview of Srucurl Trnsformion of he Nmibin Economy. Pper Presened he 10 h Bnk of Nmibi Annul Symposium, Windhoek. Rodrick, D. (2006). Undersnding Souh Afric s Economic Puzzles. NBER Working Pper 12565, NBER Working Pper Series. Schoemn, C., Bluw, D., nd Preorius, A. (2008). An Invesigion ino he Deerminns of he Souh Africn Unemploymen Re, Ac Acdemi, 40(3), Vldkhni, A. (2003). The cuses of unemploymen in Irn: An empiricl Invesigion. Inernionl Journl of Applied Business nd Economic Reserch, 1(1),

10 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 Wkeford, J. (2004). Produciviy, Wges nd Employmen in Souh Afric s Mnufcuring Secor, Developmen Policy Reserch Uni Working Pper Series, Working Pper 04/85, Cpe Town: Universiy of Cpe Town. Tbles Tble 1. Unemploymen in Nmibi Compred o oher Africn counries Counry Yer Unemploymen re/1 Lesoho Souh Afric Nmibi Boswn Tunisi Egyp Muriius Cmeroon Source: Nmibi Lbour Force Surveys, Inernionl Lbour Orgnision nd World Bnk Developmen Indicors. /1 Nrrow definiion of unemploymen (excluding people who re no looking for jobs). Tble 2. Lbour Force, Employmen nd Unemploymen, / (Sric Definiion of Unemploymen) S URVEY/A REA Employed Unemployed TOTAL FEMALES MALES Lbour Force Unemploymen Re (%) Employed Unemployed Force Lbour Unemploymen Re (%) Employed Unemployed Force loymen Lbour Unemp- Re (%) 1991 NHPS: Urbn Rurl Nionl /94 NHIES: Urbn Rurl Nionl NLFS: Urbn Rurl Nionl NLFS: Urbn Rurl Nionl NLFS: Urbn Rurl Nionl Source: Odd (2008: 51); Minisry of Lbour nd Socil Welfre (1997; 2000; 2004). Noe: NPHS is Nionl Populion Housing Census Survey. NHIES is Nionl Housing Income nd Expendiure Survey. NLFS is Nmibi Lbour Force Survey. Published by Cndin Cener of Science nd Educion 101

11 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 Tble 3. Lbour Force, Employmen nd Unemploymen, 1993/94 nd 1997 (Brod Definiion of Unemploymen) SURVEY/ TO TAL FEMALES MALES AREA Employed Unemployed Lbour Force Unemploymen d Employe Re (%) Unemployed Lbour Force Unemploymen Employe Unemployed d Re (%) Lbour Force Unemploymen Re (%) 1993/94 NHIES: Urbn Rurl Nionl NLFS: Urbn Rurl Nionl NLFS: Urbn Rurl Nionl NLFS: Urbn Rurl Nionl Source: Minisry of Lbour nd Socil Welfre (1997; 2000; 2004) nd Odd (2008: 52). Noe: NHIES is Nionl Housing Income nd Expendiure Survey. NLFS is Nmibi Lbour Force Survey. 102

12 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 Tble 4. ADF uni roo es Vrible Model specificion Tes in levels Tes in firs differences ln U Consn nd rend *** Consn *** *** ln P Consn nd rend Consn [lny Y ]# Consn nd rend ** Consn * [lny Y ]## Consn nd rend ** 4.525*** Consn *** *** [lny Y ]### Consn nd rend ** *** Consn ** *** *** ln RW Consn nd rend *** Consn *** *** ln I Consn nd rend *** Consn *** *** ln PROD Consn nd rend *** Consn *** * *** Noes: # GDP gp compued using he ol GDP. ## GDP gp compued using GDP of he secondry secor. ### GDP gp compued using mnufcuring GDP. */**/*** Indices rejecion of he null hypohesis of uni roo 10%/5%/1% significnce level. Tble 5. Long-run regression resuls Dependen vrible ln U ln U ln U Explnory vribles ln ( ) (-1.938)* (0.643) P [lny Y ]# (2.464)** [lny Y ]## 0.833(1.977)* [lny Y ]### 0.119(0.175) RW ln 0.881(2.011)* 1.789(3.817)*** 1.573(3.231)*** ln I (-5.420)*** (-1.938)* (-3.629)*** ln PROD 0.426(1.579) Time rend 0.064(1.585) 0.042(1.008) Consn (-0881) (0.676) 0.655(0.886) Adjused R-Squred Noes: # GDP gp compued using he ol GDP. ## GDP gp compued using GDP of he secondry secor. ### GDP gp compued using mnufcuring GDP. */**/*** sisiclly significn 10%/5%/1% significnce level. -sisics re in brckes. Published by Cndin Cener of Science nd Educion 103

13 Inernionl Journl of Business nd Mngemen Vol. 5, No. 10; Ocober 2010 Tble 6. Error correcion model resuls Explnory Vribles Dependen Vrible # ## ## ECM(-1) (-2.347)** (-3.828)*** (-4.093)*** ln[ b Y Y ] 3.728(1.957)* ln[ Y ln[ Y Y Y ] b 1 ] b (4.187)*** (-4.037)*** ln[ Y lni lni 1 ln P 2 lnp 3 Y ln RW 1 ] b 3 lnuncer (-2.006)* (-3.538)*** (-3.397)*** (-2.753)** 1.208(2.055)** 1.550(2.527)** 1.165(2.300)*** (1.468) (-2.140)** (-2.818)** DUMIND (-2.532)** Time rend (-2.202)** Consn (-2.347)** (-0.573) 0.110(5.748)*** R-squred Noes: # GDP gp compued using he ol GDP (ECM of column 2 in Tble 5). ## GDP gp compued using GDP of he secondry secor (ECM of column 3 in Tble 5). ### GDP gp compued using mnufcuring GDP (ECM of column 4 in Tble 5). */**/*** sisiclly significn 10%/5%/1% significnce level. -sisics re in brckes. 104