Youth Unemployment and Economic Growth in SADC countries: An Application of Okun's Law Using Panel Data.

Abstract:

The study investigates whether policies, both regional and country-specific,

should mainly focus on accelerating economic growth in the region to reduce

youth unemployment in the SADC region. In this endeavour, the study is

based on Okun’s law which prescribes that unemployment rates should

generally begin to fall when economic growth rates rise above the economy’s

potential. The study uses panel data for selected SADC countries whose

annual youth unemployment rate is above the region’s average annual rate of

20%. Upon performing a variety of panel model mis-specification tests, the

systems GMM model was chosen as the suitable model. Our findings support

Okun’s proposition of a negative relationship between changes in economic

growth and changes in unemployment rates. Our model predicts a 9.85

percent reduction in youth unemployment for every one-point increase above

the region’s GDP growth rate.

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