The Relationship between Investment and Employment in Jordan: An Econometric Analysis (1973-2005)

Abdel Baset A. Athamneh, Bashir Kh. Al- Zu'bi

Abstract


This study aimed at estimating the relationship between investment and employment in Jordan during the period 1973-2005, as well as at determining to what extent does the acceleration in investment activities could improve the levels of employment in the Kingdom.          

In order to achieve its objectives, this study developed two econometric models; the 1st was a macro econometric model and included both demand and supply sides, at which the demand on national labor and the demand on guest labor were estimated to reflect the equilibrium level of employment in the economy and its need for additional labor. The 2nd model was a dynamic model and explained the response of employment to the change in investment level.

The results of the study showed that the average period needed for investment to improve employment levels exceeded two years in all cases at which the shortest period (2.07 years) concerned the response of the demand on Jordanian labor to change in total investment, while the longest (2.68 years) concerned the response of the demand on guest labor to the change in the FDI.  With respect to the speed of adjustment, it was the fastest (0.33) in the response of the demand on guest labor to the changes in total investment contrary to the response of the demand on Jordanian labor to change in total investment which was the slowest (0.14).  

Finally, the study recommended continuing the government policy that aimed to raise the cost of the employment of guest labor, and supporting the exporting sector through supporting the employment of Jordanians in this sector by covering a part of wages paid to them.


Keywords


Investment and Employment, Labor Market Adjustment, Demand on Jordanian and Guest Labor

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