Determinants of Unemployment in Pakistan
Waqar Ahmad, Dr. Tingwu Yan, Zahoor, Mehnaz Begum, Aqsa Bibi5, Maryam Bibi
The unemployment environment in Pakistan is improving day by day because of the lack of interest of Govt. of Pakistan by not introducing investments friendly policies, rule of law and good governance; due to which foreign and local investors are not interests in making investments in Pakistan specially investors from Middle East multinationals playing an important role in uplifting the socio-economic condition of the labor class, the most vulnerable segment of our society by providing pensioner benefits. The dominant role in this regard is of Government, it’s to encourage the domestic investors for the domestic production of goods.
For this purpose, the unemployment rate is regarded as dependent variable, and independent variables are population growth rate foreign direct investment and inflation rate. The unemployment rate in Pakistan showed increase since 2002 to 2015, which is strongly depended on population growth rate foreign direct investment.
The results analyzed that the coefficient correlation of unemployment rate is negative affected from the changes in population growth. According to the above results, we can conclude that a one-unit increase in annual growth rate will decrease unemployment rate by 1.704 units.
The foreign direct investment also shows negative trait with unemployment. According to the results, a one-unit increase in foreign direct investment will decrease unemployment rate by 0.002 units.
Inflation has also negative relation with unemployment rate as through the results, we can see that a one-unit increase in inflation (CPI) will decrease unemployment rate by 0.25 units.
The R square value shows that the model is good at explaining the variables. Because the value of R square is close to one, it means that dependent variables has a perfect correlation with independent variables.