Academic journal article Journal of Economics and Economic Education Research

The Effect of Economic Growth in Relation to Unemployment

Academic journal article Journal of Economics and Economic Education Research

The Effect of Economic Growth in Relation to Unemployment

Article excerpt

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

During the last years, Kosovo had the biggest economic growth in region, for as long as the regional economies are affected by financial crisis of 2008, and later on from Eurozone debt crisis, which has touched especially some of the main commercial and investing partners in Kosovo. While Croatia and Serbia faced recession, Macedonia and Albania had a small economic growth, whereas in 2012 Kosovo had an economic growth of 3.9% of Gross Domestic Product (Pula, 2013). And, since the beginning of the financial crisis that gripped Eurozone during 2008-2012, the average economic growth of Kosovo was 4.5% (World Bank, 2012). The economic growth of Kosovo for 2016 was predicted to be 3.6%, a bit lower than in 2015 when it was 3.9%, whereas it is predicted that in 2018 the economic growth of Kosovo will reach to 3.7% (World Bank, 2016).

Due to the reason of unemployment and poverty in the country, Kosovans are necessarily obliged to accept any job offer, despite poor working conditions. The Kosovan youth are disappointed when it comes to finding a job. This has a negative effect in the future success of Kosovan youth (Baleci & Heeman, 2013). A very small percentage of young people of Kosovo are engaged in self-employment (World Bank, 2010).

The labour market in Kosovo is characterized with an increase in the unemployment rate, as new jobs have not been created in order to reduce unemployment and poverty in this country; this came due to the high market pressure of the labour force, regardless the fact that the country has an economic growth. This economic growth is stimulated by donors' aid, remittances and so on, which recently have significantly declined. That is why we fear that Kosovo has no foundation for a sustainable economic strategy (Baleci & Heeman, 2013). It is estimated that unemployment rate is 45% (Bertelsmann Stiftung, 2012). Nowadays, Kosovo remains one of the poorest countries in the region, with an unemployment rate of 45%, and with the rate of extreme poverty of 15% (Baleci & Heeman, 2013).

At present, it can be seen that immigration keeps the youth away from their land, their social life, family, environment and friends. Illegal immigration remains a challenge for the country. Immigration of Kosovan youth is decreasing the risk of unemployment in Kosovo, since they earn the living for themselves and their families living in Kosovo. Immigration has played a crucial role in the economy of Kosovo. Most probably this will be the case even for the future (Vathi & Black, 2007; Baleci & Heeman, 2013). Kosovo, within the Western Balkan countries, is the country with the highest immigration in Europe. The immigration is encouraged mainly by the economic situation. Around 43% of the immigrants left Kosovo because of economic reasons. Their main destination was Germany and Switzerland (World Bank, 2011).

So, despite continuous economic growth, its effect on unemployment reduction and poverty is little. Therefore, the following analysis will elaborate the relation between economic growth under nominal GDP, in relation to unemployment in Kosovo.

THEORY AND EXISTING LITERATURE

A range of theories and competing attitudes in the study of economic development were reviewed, representing the method of strong and weak points. Therefore sometimes derive contradictory values from state to state. In this regard, the practice of China can be considered. The empirical results show that Chinese economy has undergone a structural change, so to change and identify the main economic parameters involved in this process of economic growth (Todaro & Smith, 2012). The results of the accumulation of the capital are when in the majority of the cases the current incomes are saved and invested, in order to increase the production in the future. The investment in human resources can improve the quality of the living standard of that country, and could have a more positive effect in GDP (Todaro & Smith, 2012). …

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