The Link between Human Capital, Unemployment and Economic Growth in Ethiopia
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Date
2021-02
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Addis Ababa University
Abstract
This study investigates the link between human capital, unemployment and economic growth in Ethiopia over the period 1980/81-2018/19. The ARDL Approach to Co-integration and Error Correction Model are applied in order to investigate the long-run and short run impact of human capital and unemployment on Economic growth. Both in the long run and short run, human capital index in the form of years of schooling and returns to education has a positive impact on the level of output whereas Unemployment rate shows a negative relationship. The value of coefficient of error correction term (-0.7061) shows about 70.661percent annual adjustment towards long run equilibrium. Unlike its long run significant impact, labor force participation rate has no significant short run impact on the economy. The above results have an important policy implication. The findings of this paper imply that economic performance can be improved when human capital index based on years of schooling and returns to education show an overall increment. Such enhancements to a great extent affect human efficiency which prompts improved public yield. Henceforth strategies should be intended to make institutional limits that expansion school enrolment and returns to education by reinforcing the foundation of instructive organizations that produce quality labor.
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Economic policy, Economic Growth, Unemployment, Human capital, GDP