Modeling Trade–Employment Elasticity Nexus: Evidence from India

Abstract

The effect of trade on employment growth in India is a less-discussed issue in the international economics literature. Trade has increased the employment growth in India or not is still a debatable issue for many researchers. This study explores the impact of trade on India’s employment elasticity of growth using World development Indicator data of the World Bank and KLEMS database of India from 1982 to 2016. For this purpose, it has used the autoregressive distributed lag (ARDL) model of cointegration. The result indicates that although the share of trade in the national gross domestic product (GDP) has grown, it has failed to increase employment elasticity in the country. It may occur primarily because of the high volume of Indian imports. The share of the service sector in GDP, inflation, and foreign direct investment (FDI) are other vital factors influencing the employment intensity. Therefore, based on the empirical findings, it is suggested that policymakers should focus more on export, specifically on labor-intensive export. It will undoubtedly help to improve the employment level in the country.

Modeling trade openness–unemployment nexus in sub-Saharan Africa: the role of asymmetries

“…However, in higher income OIC countries, there exists a positive correlation between trade openness and unemployment. In the case of India, Kumar et al . (2021) used the autoregressive distributed lag (ARDL) technique to examine the trade-unemployment elasticity nexus for the period 1982–2016 and concluded that in the long run, trade openness has a negative impact on unemployment.…”

“…The authors found that trade is harmful to employment generation. Moreover, Kumar et al . (2021) applied the ARDL approach to examine the relationship between trade and employment in India for the period from 1982 to 2016 and concluded that trade positively and significantly influences unemployment.…”

“…The authors found that trade is harmful to employment generation. Moreover, Kumar et al (2021) applied the ARDL approach to examine the relationship between trade and employment in India for the period from 1982 to 2016 and concluded that trade positively and significantly influences unemployment. Again, Onifade et al (2020) used the ARDL bound testing approach and found evidence that trade openness has a positive effect on unemployment in Nigeria.…”

“…For decades, debates on the relationship between trade openness and unemployment have been contentious and the empirical outcomes have remained inconclusive. Some studies have suggested that trade openness leads to a reduction in unemployment (Bhat and Beg, 2023;Ali et al, 2021), while others have concluded that trade openness increases unemployment (Kumar et al, 2021;Ulima, 2022;Mushtaq et al, 2022;Voumik et al, 2023). Also, nonlinear panel studies on the trade openness-unemployment nexus have remained thin on the ground and evidence within the sub-Saharan African (SSA) context remains sparse.…”