Causality of Higher Education and Unemployment: An Empirical Evidence from Pakistan Economy

Abstract

Higher education and unemployment is a substantial concern for developing countries and developed countries as well. To get the empirical evidence of the Pakistan economy, the present research is being carrying on. This study applies time series data in nature covering the period from 1985 to 2018. Assessing the long run association within the policy indicators and commuting the causality of higher education and unemployment, two different econometric techniques Johansen Co-integration and Granger Causality test is arrayed whereas the annual speed of adjustment is estimated when disequilibrium enters in the system through VECM model. The Johansen Co-integration’s test reports 5 co-integrating equations and error term reveals 3 Percent for higher education in first model which postulate speed of adjustment in case of disequilibrium. Whereas second model explains 4 co-integrated and VECM reflects The results presents that any disequilibrium transpires in short term, higher education enrollment and unemployment will be converging to equilibrium in the long run at the speed of 32 and 36 percent correspondingly. The Granger causality test’s findings imply that higher education does not affect the unemployment whereas unemployment is reported to be responsive towards higher education which means unemployed labor force again enroll for higher education to absorb capacity for new professional avenues by producing innovative and constructive ideas.