An analysis of panel data on unemployment and labor force participation rates in Sub-Saharan African countries

Abstract

This study investigates the correlation between unemployment rates and rates of participation in the labor force in 46 countries in Sub-Saharan Africa over a span of 32 years, from 1991 to 2023. The data used for this analysis is sourced from an online database. Both the Kao and Pedroni panel cointegration tests produce statistically significant findings, suggesting a robust long-term association between the two variables. The Johansen cointegration test provides further validation for these findings, enhancing their robustness. Granger causality studies indicate that there is a one-way causal relationship from labor force participation rates to unemployment. This suggests that changes in labor force participation have an impact on the levels of unemployment. Using a fixed effect model, we see notable coefficients for both male and female labor force participation rates, indicating their adverse effect on unemployment rates. The analysis highlights the crucial influence of labor force participation on unemployment rates in Sub-Saharan African nations. The study's findings offer significant direction for policymakers and researchers to develop focused interventions aimed at improving labor force participation and addressing unemployment concerns in the region.