ABSTRACT: Trade liberalization historically has driven global economic growth. However, it has had varying impacts on labor. While increased trade generally boosts productivity and economic growth, it may lead to job specialization, wage stagnation and increased unemployment. In sub-Saharan Africa, these nuanced impacts are understudied. Existing research on trade liberalization in sub-Saharan Africa (SSA) has focused primarily on aggregate economic growth, with limited attention to labor market outcomes across demographic groups. This study examines the association between trade openness, measured as the ratio of total exports and imports to GDP, and unemployment across six categories: national, male, female, youth, female youth, and male youth unemployment. Using World Bank panel data for 37 SSA countries over 2008 to 2020, the study employs a two-step system Generalized Method of Moments (GMM) estimator to account for unemployment persistence and potential endogeneity. Control variables include GDP growth rate, inflation rate, foreign direct investment inflows, and the ease of starting a business score. The results indicate significant unemployment persistence across all demographic categories, with lagged coefficients ranging from 0.218 to 0.367. Trade openness is negatively and significantly associated with unemployment in all six specifications, with the largest coefficient observed for male unemployment (−0.511) and the smallest for male youth unemployment (−0.083). Ease of starting a business and FDI inflows are also negatively associated with unemployment across all models, with particularly strong associations for female unemployment. GDP growth and inflation are largely insignificant. Overall, trade liberalization was associated with improved employment outcomes, though unevenly across demographic groups. The findings are relevant to ongoing policy discussions surrounding the African Continental Free Trade Area (AfCFTA), though the reduced-form specification captures associations rather than causal effects. Complementary policies are needed, particularly targeted skills development for youth and women. The strong role of business environment and FDI highlights the importance of regulatory reforms and investment promotion. Trade intensity and institutional quality are more closely associated with employment outcomes in SSA than macroeconomic growth alone., underscoring the need for inclusive strategies that directly link trade expansion to job creation.
Abdulyekeen et al. (Sun,) studied this question.