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

Topics: Regression analysis, Linear regression, Population growth Pages: 30 (4065 words) Published: October 25, 2014
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 Overseas

Employment Agency (POEA) that serves as the link to overseas employment opportunities, and the Technical Education and Skills Development

Authority

(TESDA)

which

offers

training

and

development workshops. However, the question on whether or not these agencies work and if these are enough for our country remain unanswered.

3

It is in this background that the researcher opted to study about unemployment in the Philippines, and to identify what particular factors can affect the increase or decrease in the number of employed people, in order for the country will be more productive and competitive especially in light of the upcoming ASEAN

Economic Community in 2015.

Statement of the Problem and Objective
This paper aims to identify if population growth, government spending, and fuel imports have an effect on the unemployment rate. This paper also aims to measure the extent by which these variables affect the unemployment rate, as well as identify the relationships

between

the

independent

variables

with

the

dependent variable.

Significance of the Study
The study draws its significance from the fact that unemployment is a very relevant issue at the present time, as well as from the different social and economic consequences that unemployment can bring, such as low standards of living, low levels of productivity and output, possible rise in crime rates, migration, and political instability, among others. Hence, it is important to understand what

4

affects unemployment rate in order to be able to produce solutions to counter it.

Scope and Limitation
The study will be using time-series data for 32 years from 1980 to 2012. The data is taken from the World Bank Data Bank and are all taken from the Philippines.

The regression and estimation will be done using the software Gretl. The study will only be using the selected variables, namely, population growth, government final consumption expenditure, and fuel...


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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