Volume 12, Issue 8 (August 2025), Pages: 139-148

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 Original Research Paper

Analyzing the long-term relationship between unemployment and economic growth in Saudi Arabia: A VECM approach

 Author(s): 

 Mashael Almarafi *, Rozina Shaheen

 Affiliation(s):

 College of Business, Effat University, Jeddah, Saudi Arabia

 Full text

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 * Corresponding Author. 

   Corresponding author's ORCID profile:  https://orcid.org/0000-0003-2678-4125

 Digital Object Identifier (DOI)

  https://doi.org/10.21833/ijaas.2025.08.014

 Abstract

This study examines the relationship between unemployment and economic growth in Saudi Arabia (1991–2023), incorporating control variables such as the current account balance, school enrollment, government expenditure, inflation, oil rents, and the manufacturing and services sectors. Using a Vector Error Correction Model (VECM), we analyze both long- and short-term dynamics. Results indicate a significant long-term negative association between unemployment and GDP, current account balance, education, government spending, inflation, oil rents, and services sector performance, aligning with Okun’s Law. In contrast, manufacturing exhibits a positive relationship with unemployment, suggesting sector-specific labor market challenges. Short-term analysis reveals that roughly 20% of disequilibrium corrects annually, with GDP and current account balance driving immediate unemployment reductions. The findings underscore the need for policies that stimulate sustainable growth, enhance education, and prioritize job creation, particularly in the services sector.

 © 2025 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license ( http://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords

 Unemployment in Saudi Arabia, Economic growth dynamics, Okun's law analysis, VECM approach, Labor market trends

 Article history

 Received 26 October 2024, Received in revised form 6 April 2025, Accepted 19 July 2025

 Acknowledgment

No Acknowledgment. 

 Compliance with ethical standards

 Conflict of interest: The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

 Citation:

 Almarafi M and Shaheen R (2025). Analyzing the long-term relationship between unemployment and economic growth in Saudi Arabia: A VECM approach. International Journal of Advanced and Applied Sciences, 12(8): 139-148

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 Figures

  Fig. 1

 Tables

  Table 1  Table 2  Table 3  Table 4  Table 5  Table 6  Table 7  Table 8

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