Growth and unemployment in the MENA region :a missing link? -

Abstract

Recent uprisings in the Arab world have drawn special attention to the numerous escalating social problems, especially that of unemployment in the region. Despite the good growth performance Arab countries achieved in the last decade, economists identified such phenomenon as a “jobless growth” experience. This is because the region failed in having growth that is inclusive and job creating. The unemployment-growth nexus is one thing to be urgently examined in the Arab States. Knowing the structure of the unemployment in these countries would constitute a first step towards the reinforcement of a strong and inclusive growth. In this thesis, we will be examining Okun’s law for four Arab countries; those are Jordan, Egypt, Tunisia and Morocco. These countries were chosen due to key similarities: (i) they are all oil-importers and (ii) they have all undergone major socio-economic and political reforms. Using two different versions of Okun’s Law that are widely used in the literature; those are the basic First Difference Version and the Dynamic Version that makes use of an autoregressive distributive lag model (ARDL), we were able to find that that none of our short run coefficients are significant, whereas only in Egypt, there exists a significant long run coefficient indicating that over the long run at least, unemployment responds to changes in output as Okun has previously envisaged.