Trade Openness and Unemployment in Selected Southern African Development Community (SADC) Countries

Abstract

The relationship between trade openness and unemployment in Southern African Development Community (SADC) countries remains an area of significant interest and concern. While trade openness is often advocated for fostering economic growth and development, its potential effects on employment outcomes are complex and multifaceted. Understanding the nature and nuances of this relationship within the SADC region is crucial for policymakers and stakeholders seeking to design effective strategies that balance the benefits of trade openness with the goals of reducing unemployment and promoting inclusive growth. This study evaluates the effect of trade openness on unemployment in SADC from 1980 to 2019 using panel ARDL (pooled mean group—PMG) estimation techniques. The findings of the study show that trade openness and exports negatively impact unemployment, whereas imports positively affect unemployment in the long run. This suggests that while boosting exports and real trade, openness decreases unemployment, and imports increase job losses in the long run in the SADC region. This calls for more caution on trade openness regarding what to export and import when addressing regional unemployment reduction policies.

Assessing the effect of trade and FDI on growth-unemployment nexus

“…In that case, these two groups are the ones that suffer, since there is a probability that those low-level jobs that young or uneducated people are targeting would no longer exist with such a level of import. The results are in line with Mohler et al (2018), who found that import has a significant effect on the probability of becoming unemployed in the case of low-skilled workers, as well as the results of Gonese et al (2023), who proved the existence of a positive effect of import on unemployment. It should be noted, however, that these studies did not distinguish unemployment according to specific categories.…”

“…In terms of import, Mohler et al (2018) found that import significantly affects the probability of becoming unemployed in the case of the lowskilled labor force. Gonese et al (2023) also found that import positively affects unemployment, but only in the long run. An opposite effect was detected by Jin et al (2019).…”

“…In the scientific literature, the effect of export on growth is not straightforward, as, for example, Bakari and Mabrouki (2017) found no effect of export on growth, Kaur et al (2017) found a bidirectional causality between export and GDP, and Sarker (2024) proved the existence of positive effect. With regard to unemployment, Gonese et al (2023) proved the existence of a negative effect of export on unemployment in the long run.…”

“…Usman et al (2012) and Sarker (2024) proved a positive effect of export on GDP. As regards unemployment, Gonese et al (2023) found that export negatively affects unemployment, but only in the long run. Thus, the scientific literature does not provide a clear answer about the effect of import and export on economic growth and unemployment.…”