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Relationship between GDP, Unemployment and corruption

Introduction
During the early stages of the most recent economic recovery, there has been much discussion regarding the relationship between economic growth and employment. Though the unemployment rate is considered by many to be a lagging indicator, there is some disagreement as to whether employment itself is a coincident or lagging economic indicator. For example, in the early 1990s, the unemployment rate

increased for about a year following the end of the previous recession. Coming out of a recession, companies are thought to be reluctant to hire many more workers until they are convinced about the sustainability of a new economic recovery while people who had left the labor force during the recession return to seek to find jobs. Unemployment is one of the biggest problems of Pakistan. A person is who has ability to do work and is willing to do work, is unable to get job opportunity. In the current situation more than 30 lac people are unemployed in Pakistan

and unemployment ratio is more than 12%. The biggest reason of unemployment in Pakistan is concerned with the backwardness of agriculture sector. Agriculture is the biggest sector of our economy that contributes 20.9% to GDP and 44% people get jobs from this sector directly or indirectly. Unemployment in this sector is from two sides. First is due to the adoption of latest machinery and capital intensive technology. Due to this, demand for labour has been decreased. Second is the backwardness of this sector. There is less availability of fertilizers, pesticides, and quality seeds, absence of land reforms and lack of agriculture education. Due to all these factors agriculture sector is not expanding and there is general and hidden unemployment.

Industrial sector is the second largest sector of our economy and contributes 19% to national income. This sector should employ a large number of labors. But due to backwardness it is employing a small number of people. Due to electricity breakdown already established industry is deteriorating, resulting in the

prevailing unemployment ratio. High cost and low quality are responsible for less demand for our agricultural and industrial items. Because of less demand of such kinds of goods both the domestic and international producers are losing their interest in production.

Relationship between GDP, Unemployment and corruption The effect of corruption on growth has frequently been analyzed. The origin of this debate can be found in Mauro (1995), who argues that corruption is mainly caused by trade restrictions, subsidies, price controls, multiple exchange rate practices and foreign exchange allocation schemes, and sociological factors and shows that corruption lowers investment and thereby retards economic growth. Svendsen (2003) provides similar conclusions, arguing that low-level corruption countries have high GDP levels due to efficient collective good provisions. Similarly, Ehrlich and Lui (1999) show that corruption has a negative effect on both growth and GDP per capita. Also, Djankov, McLiesh and Ramalho (2006) show that the relationship between more business-friendly regulations and higher growth rates is consistently significant in various specifications of standard growth models. While Mauro(1995) argues that corruption decreases growth by decreasing investment, Meon and Sekkat (2005) and that corruption has a negative effect on growth independently from its impact on investment. So far, the effect of corruption on growth and GDP has been extensively analyzed and quantified. However, the effect of corruption on other macroeconomic indicators has not been studied in equally great detail.

Relationship between GDP, Unemployment and corruption

Methodology
Assumptions: Ha There is a relationship between GDP growths Rate and increasing unemployment rate. Hb Hc There is a relationship between GDP growth rate and corruption There is a relationship between unemployment and corruption.

Method of Data Collection: In this research the population was the overall GDP, Unemployment and corruption index of Pakistan from its inception. In the over all analysis there are many of the factors which were involved like GDP, culture, Literacy rate, Distribution of wealth, unemployment and corruption indexes. We have collected the data from the government sources, Google, wiki-pedia and encyclopedia.

Data Collection
The sampling had done from the statistical data of GDP growth rate as well as the unemployment and corruption indexes of Pakistan. The data was gathered from State Bank of Pakistans website, statpak.gov.pk and CIA Fact-book Sampling Technique: The several economic indicators such as GDP, Unemployment and Corruption indexes are taken to compare with the Pakistani context. The time series sampling technique is used in this research. Research model:

GDP

Corruption

Unemployment

Relationship between GDP, Unemployment and corruption

Data Analysis
Data: Year 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 GDP 3.04 4.8 4.3 2.7 5.3 6.6 6.6 6.1 5.5 3.11 Unemployment 5.6 15 14 7.4 6.5 6.6 8.3 7.7 7.8 8.051 Corruption 2.5 2.3 2.5 2.4 2.2 2.1 2.1 2.5 2.6 2.6

GDP
7 6 5 4 3 2 1 0 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 3.04 4.8 5.3 4.3 2.7 3.11 GDP 6.6 6.6 6.1 5.5

Relationship between GDP, Unemployment and corruption

Unemployment
16 14 12 10 8 6 4 2 0 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 5.6 7.4 8.3 6.5 6.6 7.7 7.8 8.051 Unemployment 15 14

Corruption
3 2.5 2.5 2 1.5 1 0.5 0 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Corruption 2.3 2.5 2.4 2.5 2.2 2.1 2.1 2.6 2.6

Relationship between GDP, Unemployment and corruption


18 16 14 12 10 8 6 4 2 0 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Corruption GDP Unemployment

The graphical representation of GDP growth rate, unemployment rate and corruption indexes show the following results: There is a negative relationship between the GDP growth rate and unemployment rate. As the GDP growth rates go up, it results in decrease in unemployment rates. There is a positive relationship between unemployment rate and corruption indexes. As the unemployment rates go up, it results in higher corruption indexes. There is negative relationship between GDP growth rate and corruption indexes. As GDP growth rates go up, it results in decrease in corruption indexes.

Relationship between GDP, Unemployment and corruption

Conclusion
GDP for many years has been used as a Key Indicator for Economist and Governments as a Lead in Indicator for what will be a Decrease in the Unemployment rate. GDP should be broken up as too a Portion derived by Production of Goods and a Portion Derived by Services. The Services Section should be Broken up to those Services provided by human Labor and those attained by Electronic Services that require, no to minimal human labor. This will provide a better indicator for increase in GDP that will lead to a reduction in the unemployment rate. Unemployment rate is the key indicator in determining the corruption indexes as it shows that the higher unemployment rate will lead to high level of corruption in the country. In Pakistan there is high level of unemployment rate so the corruption rate is also high in the country. The government should always try to open job opportunities for the people of the country as it will also help them to reduce corruption indexes. GDP growth rate is also the indicator of corruption indexes as it shows the negative relationship in them. The government should make the efforts to increase the GDP growth rate as it will decrease the corruption indexes. If there will low GDP growth rate in the country it will make the people of the country to get engaged in the criminal activities which will affect the economy of the country. So, the government should increase the countrys GDP as it will allow them to decrease the corruption indexes.

Relationship between GDP, Unemployment and corruption

Bibliography:
CIA fact book Djankov, S., McLiesh, C. and Ramalho, R.: 2006, Regulation and Growth, World Bank . Ehrlich, I. and Lui, F.: 1999, Bureaucratic Corruption and Endogenous Economic Growth, Journal of Political Economy 107(6), 270{293. Iqra Sohail, Hurmat group (2012) Mauro, P.: 1995, Corruption and Growth, Quarterly Journal of Economics 110(3), 681{712. Meon, P.-G. and Sekkat, K.: 2005, Does corruption grease or sand the wheels of growth?, Public Choice 122, 69{97. Svendsen, G.: 2003, Social Capital, Corruption, and Economic Growth, Working Paper 03(21). Trading economics Wikipedia