The Impact Of Trade Openness On Employment Rate In Algeria

Given the Algerian economy that suffers from high youth unemployment and employment problems.The purpose of this article is to investigate the nature of the relationship between open trade and employment rate.In other words,does trade openness affect employment rate? applying the linear regression model on the Algerian case during the period 1970-2018,this study used ordinary least squares(OLS)a type of linear least squares method for estimating the unknown parameters in our model.Quantitative information detailing specific variables that are likely to play a role in affecting employment were included in a model that quantifies the relationship between the explanatory variables(Trade Openness,Foreign Direct Investment,Inflation rate,Real Exchange rate,Terms of Trade,GDP per capita growth and Population Growth)and the dependent variable(employment rate).Numerous explanatory variables are incorporated into the model to allow the study to separate trade openness effect on the one hand from other macroeconomic factors on the other.The data used was obtained mostly from World Bank(World Development Indicators)and UNCTAD database and other sources.The analysis was done using Stata version 13.0 to generate the correlation matrix and the linear regression model.The study found a positive association between trade openness and employment rate indicating that higher the ratio of export and import to GDP will increase the employment rate of Algeria.The study also found significance of the individual coefficients of FDI,population growth positively significant while the exchange rate and inflation are negatively significant which means there's an Inverse relationship,if the inflation increases the employment decreases also the same for the exchange rate,if it increases the employment rate decreases and vice versa.Even though the problems in Algeria are caused not only by the external trade and openness,but also by other economic and institutional factors such as the fiscal policy,the exchange rate policy,the banking system,the governance and corruption,Algerian government should link the external trade policy with the domestic investment one in order to increase the non-hydrocarbon exports,boost economic growth,and improve job creation.Lastly,the government should prioritize industries that promote labor intensive.All this will help in absorbing large pools of the unemployed population thereby boosting employment in Algeria.