Globalization and Aggregate Employment Nexus: A Recent Experience of the Nigerian Industrial Sector

Abstract

Recently, theoretical debates tend to project the view that trade expansion in developing countries exerts a positive influence on aggregate employment in their industrial sectors, partly owing to the activities of transnational corporations which centre on the import competing firms and partly because of a strong theoretical underpinning that the propensities to export and import will shift labour demand upward. Since Nigeria is monotonically dependent on external trade for survival, globalization measured by the ratio of export plus import to GDP soared for the period. Coincidentally, aggregate employment in the industrial sector also rose, at least from liturgical observation. This paper therefore examined this relationship using Nigerian data. Contrary to these views, empirical results show that none of these does affect labour demand positively. As if that is not all, the impact of the ratio of total trade to non-oil GDP on aggregate employment is also negative. Since the result supports the view that higher propensity towards openness does not have any meaningful impact on labour absorption contrary to strong theoretical assertion, the policy implication is that Nigeria is opening up too much in the direction that seriously undermines the employment situation in the country. Openness  should therefore be cautiously carried out in the right direction.

Keywords: Globalization, Trade Openness, Economic Integration, Aggregate Employment, Industrial Sector, Nigeria.