OIL RENTS AND UNEMPLOYMENT IN AFRICA: EVALUATING THE MEDIATING EFFECTS OF TRADE OPENNESS
Keywords:
Oil rents, Trade openness, Unemployment, Africa, JEL Classification: E24; F41; O13; O55; Q35; Q37Abstract
The persistence of high unemployment in some African countries necessitates this evaluation of the mediating effects of trade openness in the oil rents and unemployment relationship in oil rent receiving Africa countries. Using the two-step system generalized method of moments on data for 27 of these countries from 2000 to 2023, this study analysed interactions of oil rents and different measures of trade openness. The analysis found a significant inverse relationship between oil rents and unemployment. However, the respective interactions of the total trade and import measures of trade openness with oil rents indicated significant direct relationships with unemployment. The study, therefore, concluded that while oil rents are associated with lower unemployment in oil rent receiving countries in Africa, the outcome is not necessarily the result of openness to trade, as openness to trade, especially import trade, in fact, increases unemployment among these countries. The formation of capital through investment of rents is the more plausible means for reducing unemployment. The study, therefore, recommended the investment of oil rents in building infrastructure to enhance the growth of gross fixed capital formation and foreign direct investments. To achieve this, improvements in transparency and accountability in public finance should be encouraged.References
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