Labour Market and Economic Growth in sub-Saharan Africa Countries

Nosakhare Liberty Arodoye; Abidemi Cornelius Adegboye; Elvis Ajiboye Osumah; Monday Iyare Egharevaba

Nosakhare Liberty Arodoye Department of Economics, University of Benin, Edo, Nigeria
Abidemi Cornelius Adegboye Department of Economics, University of Lagos, Lagos, Nigeria
Elvis Ajiboye Osumah Department of Public Administration, Edo State Polytechnic, Edo, Nigeria
Monday Iyare Egharevaba Department of Economics, Adeyemi Federal University of Education, Ondo, Nigeria

Keywords: Labour Market, Economic Growth, Panel Data

Abstract

Labour market is an important institution for driving sustained and long-term growth in an economy. This study examined the relationship between labour market and economic growth for forty (40) sub-Saharan Africa (SSA) countries over the period of from 1991 to 2020. A dynamic panel data estimation technique was employed in the empirical analysis using the system Generalised Method of Moments approach. The results from the study reveal a strong positive effect of employment rate on economic growth in SSA. This implies that improvement in absorptive capacity of the labour market significantly improves economic activities in the region. There is however indication that inefficiency in the labour markets in SSA in terms of demand and supply of labour in the employment process has tended to derail the effectiveness of labour in the growth process. In particular, there is evidence that labour force participation rate weakens economic growth in SSA. Thus, while the demand side of the labour market appears to align with the broad relationship between the labour market and economic growth, the supply side essentially derails the relationship. The study therefore recommends that countries of the SSA region should strengthen employment growth by eliminating barriers in the productive sector, increasing aggregate productivity and ensuring stable macroeconomic environment. Excessive growth in youth population also needs to be addressed.

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