An investigation of the relationship between youth unemployment and economic growth in Uganda

Abstract

The study examined the relationship between unemployment and economic growth in Uganda; and specifically focused on the relationship between youth unemployment and economic growth for the period 1994-2017 using quaterlised data. Cointegration test and its associated Error Correction Modelling were used in the analysis. The variable Real Gross Domestic Product (RGDP) was used as common proxy for economic growth. Youth unemployment rate (YUNEMP), Inflation (INF) and Private Consumption Expenditure (PCE) were employed in the investigation. Stationarity test was conducted through the application of the Augmented Dickey - Fuller (ADF) test and the Phillips Perron test. The results indicated that all the variables were non stationary at levels, and stationary attained after first differencing. Additionally, the result of the Johansen co-integration test revealed the existence of a significant long run relationship that exists among RGDP, YUNEMP, INF and PCE. All variables were significant in explaining growth in the long run with youth unemployment being growth reducing while inflation and private consumption expenditure were growth augmenting. The study, therefore, recommends that government should create more employment opportunities to absorb the young population of the unemployed labour force in the country. It should also embark on skilling the youth and encouraging them to start up income generating activities. This will go a long way in reducing unemployment level in the country.