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Analyzing Nigeria’s unemployment problem: evidence from the quantile regression approach

Author

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  • Fatai, Adesola
  • Adekunle, Wasiu

Abstract

Most studies on Okun’s Law focus on mean effects using ordinary least squares or dynamic models, with limited use of quantile regression. This leaves unexplored how output growth impacts unemployment across different points of the unemployment distribution. By applying a static quantile regression framework, this study fills this gap in analyzing the unemployment problem and its key determinants in Nigeria from 1991 to 2024. The findings showed that aggregate GDP growth reduces unemployment, with stronger effects at higher quantiles. However, results showed a weaker-than-expected Okun’s Law coefficient, reflecting the non-inclusive nature of Nigeria's economic growth. Sectoral analysis reveals that while Agriculture and Industry exert limited effects, the Construction and Services sectors significantly reduce unemployment, particularly through key activities such as Professional & Scientific Services, Trade, Real Estate, and Health. Government consumption largely worsens unemployment, whereas net FDI inflows foster job creation. The results highlight the need for structural transformation and policy realignment towards productive investments that strengthen the employment intensity of growth.

Suggested Citation

  • Fatai, Adesola & Adekunle, Wasiu, 2025. "Analyzing Nigeria’s unemployment problem: evidence from the quantile regression approach," MPRA Paper 126775, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:126775
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    References listed on IDEAS

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    1. Silvia Palombi & Roger Perman & Christophe Tav鲡, 2015. "Regional growth and unemployment in the medium run: asymmetric cointegrated Okun's Law for UK regions," Applied Economics, Taylor & Francis Journals, vol. 47(57), pages 6228-6238, December.
    2. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    3. Charles Adams & David T. Coe, 1990. "A Systems Approach to Estimating the Natural Rate of Unemployment and Potential Output for the United States," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 232-293, June.
    4. Usha Devi Chuttoo, 2020. "Effect of Economic Growth on Unemployment and Validity of Okun’s Law in Mauritius," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(2), pages 231-250, May.
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    Keywords

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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