Unemployment and Economic Growth Between Saudization and Empowerment in the Vision of the Kingdom of Saudi Arabia

Abstract

This research aims to analyze the connection between economic growth and the unemployment rate in Saudi Arabia from the first quarter of 2011 to the third quarter of 2022.The analysis is conducted using the standard OLS, OLS with robust standard errors and 2SLS techniques. In addition, the paper employs the difference version and gap version of Okun’s Law.The results indicate a negative correlation between the global unemployment rate and economic growth. In addition, an increase in output by 1% induces a decrease in the global unemployment rate from -0.115% to -0.161%. The analysis also shows the validity of Okun’s Law for the Saudi and non-Saudi labor force. However, the Saudi unemployment rate reacts more strongly than the non-Saudi unemployment rate. Finally, the study shows that only the male unemployment rate reacts to economic growth. Fluctuations in economic growth have no impact on the female unemployment rate, even when heteroscedasticity and endogeneity are considered. These results are of importance for the design of policies to reduce unemployment.