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Trade openness and unemployment: Empirical evidence for Nigeria

Published online by Cambridge University Press:  01 January 2023

Ikechukwu D Nwaka ,
Kalu E Uma  and
Gulcay Tuna
Ikechukwu D Nwaka*
Affiliation:
Eastern Mediterranean University, Famagusta, North Cyprus, via Mersin, Turkey
Kalu E Uma
Affiliation:
Federal University Ndufu Alike-Ikwo, Nigeria
Gulcay Tuna
Affiliation:
Eastern Mediterranean University, Famagusta, North Cyprus, via Mersin, Turkey
*
Ikechukwu D Nwaka, Department of Economics, Eastern Mediterranean University, Famagusta, North Cyprus, via Mersin 10, Turkey. Email: [email protected]
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Abstract

In the wake of the global financial crisis, unemployment rates and openness to trade have been the subject of considerable research, especially in developing countries. This study analyses the impacts of trade policy on unemployment rates in Nigeria. Using time series data from 1970 to 2010, it adopts the vector error correction methodology. In order to explore the impact of a range of variables on the relationship between trade openness and national unemployment rates, these variables, in a system of equations, include measures of trade openness, public recurrent spending on education, foreign price shocks and real gross domestic product or alternatively income per capita. The findings reveal that in the long run, real output and income per capita lead to a decline in unemployment, but trade openness policy is associated with an increase in unemployment. Foreign policy shocks, as proxied by commodity prices, also exert a positive effect on unemployment rates and do not contribute subsequently to restoring the system to equilibrium. However, the initial impact of openness and foreign price shocks captured by short-term dynamics are observed to reduce unemployment.

Keywords

F13E24F43E62Cointegrationtrade opennessunemployment ratevector error correction model
Type
Articles
Information
The Economic and Labour Relations Review , Volume 26 , Issue 1 , March 2015 , pp. 117 - 136
Copyright
Copyright © The Author(s) 2015

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