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

Abstract

PurposeWhile several existing panel studies have focused on the linear specifications of the nexus between trade openness and unemployment, nonlinear panel studies on this subject remain less explored. This paper examines the asymmetric nexus between trade openness and unemployment in 34 selected sub-Saharan Africa (SSA) countries for the period spanning from 1991 to 2020.Design/methodology/approachThe Pedroni and Westerlund panel cointegration tests were conducted to ascertain a long run relationship among the studied variables, while the panel nonlinear autoregressive distributed lag approach was applied to account for asymmetries.FindingsThe study revealed among other things that trade openness asymmetrically influences unemployment in the selected panel of SSA countries. In the long run, the positive shock in trade openness on unemployment is greater as compared to the negative shock.Research limitations/implicationsThe implications of this study include the need to (1) ensure the effective monitoring and supervision of trade flows in the sub-region so that their full benefits are maximized in terms of job creation and (2) ensure that a positive trade balance is maintained in the selected SSA countries.Originality/valueThe positive and negative shocks in trade openness are examined to determine their asymmetric effects on unemployment.