The Impact of Economic Growth on Unemployment in Ghana: Which Economic Sector Matters Most?

Abstract

Unemployment tends to be one of the major challenges bedevilling the Ghanaian economy. Therefore, in the attempt to combat unemployment, focus has always been on attaining higher economic growth. However, in spite of the seemingly satisfactory growth rates in recent times, the unemployment challenge in Ghana is still on the rise. This study therefore contends that it is rather important to find out how the various constituents (sectors of the economy) of economic growth (GDP) affect unemployment rate in Ghana and hence inform us as to which sector should be focused on, rather than just lumping all sectors together in the form of GDP and studying its impact on unemployment. Hence, using annual time series data on Ghana from 1991-2014 and employing the ordinary least square regression technique whiles testing for the robustness of our results, the study found that, only the service sector had a negative significant impact on unemployment rate in Ghana. Thus, attention must be paid towards expanding the service sector in our drive to reduce unemployment in Ghana.