An analysis on Factors that Affect Unemployment Rate : The Philippine Case

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An Analysis on Factors that Affect
Unemployment Rate: The Philippine Case
An empirical paper presented to
Dr. Cesar Rufino
School of Economics
De La Salle University

In partial fulfillment of the course requirements in ECONMET

Submitted by:
Ramon Mikael S. Cabazor

April 12, 2014

Table of Contents
Introduction
Background of the Study
Statement of the Problem and Objective
Significance of the Study
Scope and Limitation

3
3
4
4
5

Review of Related Literature
Unemployment and its Impact on Economic growth
Unemployment and Population Growth
Unemployment and Government Spending
Unemployment and Fuel Imports

6
6
7
8
9

Operational Framework
Description of Variables
A-priori Expectations
Model Specification
Estimation Procedure

11
11
12
13
14

Methodology
Data Presentation
Initial Regression
Test for Omitted Variable Bias
Test for Multicollinearity
Test for Autocorrelation
Test for Heteroscedasticity

15
15
16
18
20
21
24

Discussion of Results and Conclusion

26

Policy Recommendations

28

Bibliography

29

2

Introduction
Background of the Study
The Philippines is now among those economies that are growing at a rapid rate, posting a 7.2% GDP growth as of 2013 (National
Statistics Coordination Board, 2014). However, this is far from inclusive as evidenced by the number of unemployed Filipinos growing to more than 12 million individuals, which is translated to a
27.5% unemployment rate (Antonio, de Villa, & Esguerra, 2014).
This is a big problem since one out of every four Filipinos that are actively seeking a job cannot find one, which means that they are deprived of a stable source of income to support their needs.

Recognizing this issue, the government has certain agencies and offices that are designed to help citizens improve their employment prospects and land jobs, such as the Bureau of Local Employment
(BLE) that provides career guides, the Philippine



Bibliography: Antonio, R. L., de Villa, K., & Esguerra, C. V. (2014, February 11). Jobless Filipinos hit 12.1M: SWS: Unemployment rate rose to 27.5% in Q4. Brooks, R. (2002, February). Why Is Unemployment High In The Philippines? IMF Working Paper Series . Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics. New York, New York, United States of America: McGraw-Hill/Irwin. Knotek II, E. S. (2007). How Useful is Okun 's Law? Kansas, Texas, United States of America: Federal Reserve Bank of Kansas. Loku, A., & Deda, G. (2013). Unemployment in Relation of Growth Population. Löschel, A., & Oberndorfer, U. (2009, Januart). Oil and Unemployment in Germany Mellquist, H., & Femermo, M. (2007, January). The Relationship between the Price of Oil and Unemployment in Sweden. National Statistics Coordination Board. (2014, January 30). Philippine Economy Grew by 7.2 percent in 2013; 6.5 percent in Q4 2013 Value and Quality Statement. Retrieved March 28, 2014, from Technical Education and Skills Development Authority:

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