A Dynamic Panel Analysis of Unemployment Determinants in African Economies

Unemployment represents one of the most pressing economic challenges confronting countries worldwide, It affects not only developing countries but also developed countries. However, the factors influencing employment outcomes vary across regions, and African countries exhibit distinctive structural characteristics that shape their labor markets. The lack of consensus in the literature regarding the key determinants of unemployment in Africa, combined with the relative scarcity of empirical studies, makes it difficult to design effective policy responses. Therefore, This study seeks to identify and quantify the main economic factors influencing unemployment in African countries over the period 2001–2023. The analysis covers 34 countries and employs several panel data techniques, including Pooled OLS, Fixed Effects (FEM), Random Effects (REM), and the Dynamic Generalized Method of Moments (difference GMM). The investigation focuses on four principal economic determinants: Gross Domestic Product (GDP), inflation (INF), foreign direct investment (FDI), and the share of wage and salaried workers (WAGE). The study relied on the results of estimating the generalized dynamic Moments method, and The empirical findings reveal a negative relationship between unemployment and each of these variables. Among them, GDP exerts the strongest effect in reducing unemployment, followed by the share of wage and salaried workers, FDI, and inflation.