Acta Universitatis Danubius. Œconomica, Vol 15, No 4 (2019)

Import Competition and Unemployment in Nigeria

Oziengbe Scott Aigheyisi

Abstract


The paper examines the effect of import competition on unemployment in Nigeria during the period from 1981 to 2017. The ARDL (Bounds) test approach to cointegration and error correction modeling was employed for the analysis. The study finds significant negative short run effect and significant positive long run effect of import competition on unemployment in the country. These suggest that import competition reduces unemployment in the short run, but worsens the unemployment problem in the long run. The Okun’s law is also validated as the study finds inverse relationship between real GDP and unemployment in the short- and long-run, implying that economic growth reduce unemployment in the country. The short run Phillips curve is validated as trade-off is found to exist between inflation and unemployment in the short run. This relationship is sustained in the long, thus invalidating the long run Phillips curve which proposes no trade-off between inflation and unemployment. The effect of government final consumption expenditure on unemployment is found to be negative in the short run, but positive in the long run. The level of investment in the economy is found to have been inadequate to create jobs as the effect of capital formation is found to be statistically not significant. Based on the empirical evidence, the study recommends efforts by the government to set the economy on a sustainable growth path, keep inflation at levels compactible with investment and growth, invest massively in and encourage private sector participation in the productive sectors of the economy to boost output quality and quantity so as to reduce import dependence and enhance product competitiveness in both domestic and  foreign markets, and reduction of government final consumption expenditure while increasing expenditure in capital projects with the potentials for job creation in the long run.

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