Mohamed, Abdikadi Ahmed; Abdulle, Abdikani Yusu ; Oma , Mahdi Mohamed
A icle
The ole o mac oeconomic ac o s in shaping
employmen ends in Somalia
Cogen Economics & Finance
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Sugges ed Ci a ion: Mohamed, Abdikadi Ahmed; Abdulle, Abdikani Yusu ; Oma , Mahdi Mohamed
(2024) : The ole o mac oeconomic ac o s in shaping employmen ends in Somalia, Cogen
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The ole o mac oeconomic ac o s in shaping
employmen ends in Somalia
Abdikadi Ahmed Mohamed, Abdikani Yusu Abdulle & Mahdi Mohamed
Oma
To ci e his a icle: Abdikadi Ahmed Mohamed, Abdikani Yusu Abdulle & Mahdi Mohamed
Oma (2024) The ole o mac oeconomic ac o s in shaping employmen ends in Somalia,
Cogen Economics & Finance, 12:1, 2416989, DOI: 10.1080/23322039.2024.2416989
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GENERAL & APPLIED ECONOMICS | RESEARCH ARTICLE
The ole o mac oeconomic ac o s in shaping employmen ends
in Somalia
Abdikadi Ahmed Mohamed , Abdikani Yusu Abdulle and Mahdi Mohamed Oma
Facul y o Economics and Managemen , Jamhu iya Uni e si y o Science and Technology, Mogadishu, Somalia
ABSTRACT
Somalia has one o he mos se e e unemploymen a es globally, due o i s eco-
nomic ins abili y. Ou s udy ocuses on he mac oeconomic e ec s on employmen
using an ARDL model. The key mac oeconomic a iables examined a e GDP, in la ion,
FDI, o eign aid, and popula ion g ow h, wi h da a sou ced om he Wo ld Bank span-
ning 32yea s, om 1991 o 2022. The s udy ound ha GDP posi i ely a ec s employ-
men in bo h he sho and long un. In la ion shows a posi i e co ela ion wi h
employmen in he sho un bu a nega i e e ec bu insigni ican in he long un.
FDI has a posi i e e ec in he long un and a nega i e, insigni ican e ec in he
sho un. Fo eign aid posi i ely impac s employmen in bo h he sho and long un,
hough he e ec is no signi ican in he la e . he s udy ecommends policies o
sus ain economic g ow h, manage popula ion g ow h, s abilize p ices, and imp o e
aid managemen o enhance employmen oppo uni ies in Somalia.
IMPACT STATEMENT
This esea ch examines he mac oeconomic de e minan s o employmen in Somalia,
ocusing on he e ec s o economic g ow h, in la ion, o eign di ec in es men (FDI),
o eign aid, and popula ion g ow h om 1991 o 2022. Using an ARDL model, he
s udy p o ides bo h sho - e m and long- e m insigh s in o how hese ac o s in lu-
ence employmen ends. The indings unde sco e he posi i e ole o GDP g ow h
and o eign aid in p omo ing employmen , while highligh ing he nega i e impac o
apid popula ion g ow h on job c ea ion. This wo k is signi ican as i o e s a ge ed
policy ecommenda ions o add ess Somalia’s unemploymen challenges, emphasizing
he need o sec o al di e si ica ion, imp o ed go e nance o o eign aid, and s a -
egies o s abilize FDI lows. The s udy p o ides a i al con ibu ion o he limi ed li -
e a u e on Somalia’s employmen dynamics and se es as a guide o policymake s
wo king o os e sus ainable economic g ow h and job c ea ion.
ARTICLE HISTORY
Recei ed 25 July 2024
Re ised 18 Sep embe 2024
Accep ed 10 Oc obe 2024
KEYWORDS
Employmen ; economic
g ow h; in la ion; FDI;
popula ion g ow h;
mac oeconomic; ARDL;
Somalia
SUBJECTS
Mac oeconomics;
Economics; Economic
Fo ecas ing
In oduc ion
Employmen is a key indica o o economic heal h, de ined by he Wo ld Bank as he ac ion o he
popula ion aged 15 and olde ha is employed (Wo ld Bank, 2024). Howe e , global employmen ends
emain challenging, wi h he In e na ional Labou O ganiza ion (ILO) p ojec ing a modes ise in
unemploymen o 2024, pa icula ly in low-income coun ies whe e po e y and unemploymen a es
a e pe sis en ly high (ILO, 2024). A ica’s employmen landscape has been shaped by une en economic
g ow h, d i en by ac o s such as na u al esou ce endowmen s, poli ical s abili y, and in as uc u e
de elopmen (Adekunle e al., 2023). While Fo eign Di ec In es men (FDI) in A ica has inc eased, pa -
icula ly in na u al esou ces and elecommunica ions, i s o e all sha e o global FDI emains small due
o challenges like poli ical ins abili y and egula o y unce ain ies (Asiedu, 2002). Simila ly, o eign aid
plays a c ucial ole in unding de elopmen p ojec s, bu i s impac on economic g ow h and employ-
men is o en mixed due o go e nance and co up ion issues (Moyo, 2009). In la ion, which a ies
CONTACT Abdikadi Ahmed Mohamed [email p o ec ed] Facul y o Economics and Managemen , Jamhu iya Uni e si y o
Science and Technology, Mogadishu, Somalia.
ß2024 The Au ho (s). Published by In o ma UK Limi ed, ading as Taylo & F ancis G oup
This is an Open Access a icle dis ibu ed unde he e ms o he C ea i e Commons A ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. The e ms on which his a icle has been
published allow he pos ing o he Accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
COGENT ECONOMICS & FINANCE
2024, VOL. 12, NO. 1, 2416989
h ps://doi.o g/10.1080/23322039.2024.2416989
widely ac oss A ican coun ies, is d i en by ac o s like cu ency luc ua ions and iscal policies, o en
posing a challenge o economic s abili y in coun ies wi h weake ins i u ions (Fedelino & Te -Minassian,
2009).
S ylized ac s on employmen and mac oeconomic a iables
Somalia, in pa icula , has aced signi ican economic challenges due o decades o poli ical ins abili y,
con lic , and a lack o cen al go e nance ollowing he collapse o he go e nmen in 1991 (Menkhaus,
2007,2014). This ins abili y has led o he disin eg a ion o o mal economic ins i u ions, se e ely dis-
up ing economic ac i i ies and employmen oppo uni ies. As o 2023, Somalia’s unemploymen a e
s ands a 19.19%, one o he highes globally, wi h he coun y s uggling o c ea e su icien job oppo -
uni ies, especially o i s la ge you h popula ion (UNDP, 2024; Wo ld Bank, 2023).
Somalia’s economy is hea ily elian on ag icul u e, pa icula ly li es ock p oduc ion, which makes up
a signi ican po ion o GDP. Howe e , his sec o is highly ulne able o clima e a iabili y, including e-
quen d ough s and e a ic ain all pa e ns ha h ea en ood secu i y and dis up u al employmen
oppo uni ies (Wa same e al., 2022). Despi e hese challenges, Somalia has seen modes economic
g ow h in ecen yea s, wi h GDP g ow h a es imp o ing om 2.4% in 2022 o 3.7% in 2023, and u -
he g ow h an icipa ed in 2024 wi h he comple ion o he deb elie p ocess (A ican De elopmen
Bank G oup, 2024).
Fo eign di ec in es men (FDI) has also played a c ucial ole in Somalia’s economic eco e y. In 2022,
Somalia a ac ed USD 4.9 billion in FDI, p ima ily in sec o s such as ag icul u e, li es ock, ishing, and
hyd oca bons (Lloyds Bank, 2024). Howe e , FDI emains ola ile due o poli ical ins abili y and weak
egula o y amewo ks, making he business en i onmen unp edic able. Addi ionally, Somalia anks
among he op ecipien s o o eign aid globally, wi h o eign aid inancing wo- hi ds o he na ional
budge (BTI, 2024). While o eign aid is essen ial o suppo ing key sec o s like heal hca e, educa ion,
and in as uc u e, i s impac on sus ainable job c ea ion has been limi ed, o en unde mined by go e n-
ance challenges and ine iciencies (Moyo, 2009).
In la ion has been ano he pe sis en challenge o Somalia, luc ua ing due o weak iscal manage-
men and cu ency ins abili y. Al hough in la ion a es a e p ojec ed o decline o 5.21% in 2024, p e i-
ous high in la ion has e oded pu chasing powe and complica ed e o s o educe unemploymen
(A ican De elopmen Bank G oup, 2024). Meanwhile, Somalia’s popula ion g ow h a e, es ima ed a
3.2% in 2024, adds u he p essu e on he economy (Wo ld Popula ion Re iew, 2024). Wi h 70% o he
popula ion unde he age o 30, he labo ma ke aces signi ican challenges in abso bing his apidly
expanding young wo k o ce, con ibu ing o widesp ead you h unemploymen .
Mac oeconomic s abili y, economic g ow h, and low in la ion a e key d i e s o employmen c e-
a ion (In e na ional Mone a y Fund, & Wo ld Bank, 2024). Fac o s such as FDI (Tan ee e al., 2019),
o eign aid, and con olled popula ion g ow h also play an essen ial ole in os e ing an en i onmen
conduci e o employmen gene a ion (Fo e & Ab eu, 2023). Coun ies ha enjoy such a o able
mac oeconomic condi ions o en expe ience sus ained economic de elopmen , lowe unemploymen ,
and imp o ed social well-being (Pieloch-Babia z e al., 2021). Howe e , in Somalia, employmen con-
di ions emain challenging, wi h he coun y con inuing o ank among hose wi h he highes
unemploymen a es in he wo ld (Maow, 2021).
While he e has been subs an ial esea ch on how indi idual mac oeconomic ac o s such as eco-
nomic g ow h, in la ion, and FDI a ec employmen in a ious con ex s (Meye & Sanusi, 2019; Nguyen,
2024; Nguyen e al., 2024), limi ed esea ch has ocused on he combined e ec s o hese ac o s on
employmen in Somalia. This gap in he li e a u e is c i ical, as unde s anding he in e ac ion o mul iple
mac oeconomic a iables is essen ial o de eloping a ge ed policies ha can add ess Somalia’s unique
employmen challenges.
This s udy seeks o ill his gap by u ilizing an Au o eg essi e Dis ibu ed Lag (ARDL) model o ana-
lyze he ela ionships be ween economic g ow h, in la ion, FDI, o eign aid, and popula ion g ow h on
employmen in Somalia. By employing ime se ies da a om he Wo ld Bank, he s udy will p o ide
insigh s ha can help policymake s design e ec i e s a egies o inc ease employmen oppo uni ies
and p omo e sus ainable economic g ow h in Somalia.
2 A. A. MOHAMED ET AL.
Li e a u e e iew
The ela ionship be ween mac oeconomic ac o s and employmen ends has been widely s udied in
bo h de eloped and de eloping coun ies. Howe e , esea ch in eg a ing mul iple mac oeconomic a ia-
bles o assess hei collec i e impac on employmen , pa icula ly in Somalia, emains limi ed. This li e a-
u e e iew explo es how economic g ow h, in la ion, o eign di ec in es men (FDI), o eign aid, and
popula ion g ow h a ec employmen , o ming he basis o his s udy.
Theo e ical amewo k
Economic heo ies p o ide di e se p edic ions ega ding he impac o mac oeconomic ac o s on
employmen . Acco ding o Keynesian economics, economic g ow h d i es employmen by s imula ing
demand o goods and se ices. Keynes a gued ha du ing economic expansions, inc eased consume
demand leads o highe p oduc ion, which in u n c ea es mo e jobs (Aue bach & Go odnichenko, 2017).
Con e sely, he Phillips Cu e posi s a sho - e m adeo be ween in la ion and unemploymen , whe e
highe in la ion esul s in lowe unemploymen in he sho un (Phillips, 1958). Howe e , his ela ion-
ship disappea s in he long un, acco ding o some empi ical indings.
Fo eign Di ec In es men (FDI) is ano he c i ical mac oeconomic a iable in luencing employmen .
Dunning’s Eclec ic Pa adigm (OLI Model) sugges s ha FDI boos s employmen h ough he in low o
capi al, ad anced echnology, and manage ial expe ise (Dunning, 2015). Howe e , he ex en o which
FDI posi i ely a ec s employmen depends on how well he domes ic economy can abso b hese
bene i s.
Simila ly, Aid E ec i eness Theo y (Bu nside & Dolla , 2000) a gues ha o eign aid can p omo e
employmen by unding in as uc u e, educa ion, and heal h p ojec s. Howe e , he e ec i eness o o -
eign aid depends on p ope managemen , wi h co up ion o ine iciencies o en educing i s impac .
Finally, Demog aphic T ansi ion Theo y explains how popula ion g ow h a ec s employmen ac oss di -
e en s ages o de elopmen . Rapid popula ion g ow h may lead o a su plus labo o ce, which, i no
abso bed by he economy, can esul in high unemploymen (Galo , 2012).
Empi ical e idence
Se e al s udies highligh he ela ionship be ween economic g ow h and employmen , hough he
s eng h o his ela ionship a ies ac oss con ex s. (Mush aq e al., 2022) employed panel da a analysis
o assess he impac o economic g ow h on employmen ac oss Asian coun ies show and ound ha
economic g ow h signi ican ly boos s employmen in Asian coun ies. Howe e , he panel da a app oach
may obscu e coun y-speci ic ac o s, which a e c i ical in agile economies like Somalia. (Haide e al.,
2023) used a s uc u al ec o au o eg ession (SVAR) model o show ha in de eloping coun ies, GDP
g ow h does no always lead o p opo ional employmen gains, a phenomenon known as ‘jobless
g ow h’. Howe e , he SVAR model assumes shocks a e exogenous, which may no apply o Somalia,
whe e poli ical ins abili y is likely an in e nal ac o a ec ing bo h g ow h and employmen . (Meye &
Sanusi, 2019) applied a causali y es o iden i y a bi-di ec ional ela ionship be ween g ow h and
employmen in Sou h A ica, bu his me hod does no accoun o long- e m s uc u al challenges like
he in o mal economy, which is highly ele an o Somalia’s employmen landscape. (Bluedo n, 2013)
discuss he ola ili y o capi al lows and how his impac s employmen , a pe inen issue in Somalia
gi en i s poli ical ins abili y and eliance on o eign in es men . Somalia’s economy, like many o he a-
gile economies, aces challenges in main aining s able capi al lows, which unde mines sus ainable job
c ea ion. These s udies collec i ely highligh ha while economic g ow h can d i e employmen , he
unique con ex o Somalia, cha ac e ized by ins abili y, may equi e a mo e ailo ed app oach ha
add esses s uc u al de iciencies beyond g ow h.
The Phillips Cu e sugges s a adeo be ween in la ion and unemploymen , bu i s alidi y has been
ques ioned, pa icula ly in de eloping economies. (Cama a e al., 2023) employed an econome ic model
analyzing in la ion a es and employmen ac oss Sub-Saha an A ica, showing ha in la ion abo e 14%
has a signi ican ly nega i e impac on employmen . Thei s udy uses a ixed h eshold o in la ion, bu
COGENT ECONOMICS & FINANCE 3
his may no accoun o coun y-speci ic nuances in in la ion dynamics. Somalia, wi h i s his o y o cu -
ency ola ili y, may expe ience in la ion di e en ly, meaning a dynamic model would be mo e app op i-
a e. (Angelo , 2023) explo ed he non-linea e ec s o in la ion on employmen using a gene alized
addi i e model (GAM), which o e s lexibili y in modeling ela ionships. This me hod is mo e sui able o
Somalia’s ola ile in la ion en i onmen , as i does no assume a linea ela ionship. The a ia ion in
me hodological app oaches highligh s he complexi y o applying gene alized in la ion models o agile
economies like Somalia, whe e in la iona y p essu es a e mo e ola ile.
Fo eign Di ec In es men (FDI) is widely ecognized as a ca alys o employmen , bu he long- e m
s abili y o i s impac in agile economies emains con es ed. (Nguyen e al., 2024) employed a panel
da a analysis, showing ha FDI posi i ely impac s bo h high- and low-skilled employmen by in oducing
ad anced echnologies and manage ial expe ise. Howe e , hei eliance on panel da a a e ages ou
coun y-speci ic a ia ions, which migh downplay he ole o ola ili y in agile economies like
Somalia. (Rong e al., 2020) used a sec o al analysis app oach, showing ha FDI suppo s job c ea ion in
labo -in ensi e indus ies. This me hod, hough use ul, does no conside he ins abili y o capi al lows
in agile con ex s like Somalia, (A olabi & Rai u, 2024) used a sec o al analysis app oach o show ha
FDI p omo es employmen in labo -in ensi e sec o s, pa icula ly in de eloping economies. This inding
is highly ele an o Somalia, whe e FDI lows in o ag icul u e, li es ock, and hyd oca bons—sec o s
ha a e labo -in ensi e and i al o employmen . Howe e , despi e his posi i e impac , (Bluedo n,
2013) and (Chle sos & Sin os, 2021) cau ion ha in agile economies like Somalia, capi al lows and
inancial agili y can limi he long- e m bene i s o FDI on employmen . (Chle sos & Sin os, 2021) speci -
ically examine he ole o inancial agili y in economically ulne able coun ies and i s di ec e ec s on
employmen . Thei indings sugges ha wi hou add essing unde lying inancial ins abili y, he employ-
men bene i s o FDI in agile s a es can be sho -li ed o uns able. This insigh is c ucial o Somalia,
whe e poli ical and inancial ins abili y may unde mine he po en ial gains om FDI.
Fo eign aid plays a c ucial ole in employmen c ea ion by inancing in as uc u e and de elopmen
p ojec s. (Tan ee e al., 2019) used a c oss-coun y panel eg ession o examine he e ec s o aid on
employmen . While hei indings a e gene ally posi i e, c oss-coun y eg essions can su e om omi -
ed a iable bias, pa icula ly when go e nance quali y and co up ion majo issues in Somalia a e no
ully accoun ed o . (Ma
ınez-Za zoso e al., 2016) ound ha o eign aid can posi i ely impac de elop-
men ou comes when coun y-speci ic ac o s a e conside ed. Howe e , hei ixed-e ec s model may
no ully accoun o go e nance challenges, such as co up ion, which a e pa icula ly ele an o
Somalia and can dis o aid e ec i eness. (Gnangnon, 2020) applied a ime-se ies analysis o s udy how
‘Aid o T ade’p og ams can p omo e employmen di e si ica ion in agile economies. This me hod is
mo e con ex -speci ic and hus be e sui ed o Somalia, whe e sec o al di e si ica ion is c ucial o s a-
bili y. Howe e , he challenges o go e nance and co up ion, as no ed by Chle sos and Sin os (2023), in
hei analysis o IMF p og ams, emain a key limi a ion in ensu ing he e ec i eness o aid in Somalia.
These s udies sugges ha while aid can p omo e employmen , i s impac is con ingen on go e nance
quali y, which emains a pe sis en challenge in Somalia.
Somalia’s apid popula ion g ow h poses bo h oppo uni ies and challenges o employmen c ea ion.
(Adeosun & Popogbe, 2021) used a linea eg ession model o show ha apid popula ion g ow h exac-
e ba es unemploymen when job c ea ion does no keep pace. While linea models p o ide a clea pic-
u e, hey may o e simpli y he ela ionship be ween popula ion g ow h and employmen by no
accoun ing o complex dynamics like labo ma ke sa u a ion o mig a ion. (Mush aq e al., 2022) con-
i m hese indings bu use panel da a, which, as men ioned ea lie , can obscu e speci ic na ional con-
ex s. (Ngai & Pe ongolo, 2017) used a sec o al model o explo e he ise o he se ice economy and
i s implica ions o gende ed employmen pa e ns. This app oach is mo e ele an o Somalia as he
coun y seeks o di e si y away om ag icul u e. Howe e , he applica ion o hei indings o Somalia
equi es ca e ul conside a ion, as he coun y’s economic in as uc u e may no ye suppo he scale o
se ice-sec o g ow h seen in mo e s able economies. (Klu e e al., 2019), p o ide a me a-analysis on
you h employmen p og ams, using a wide ange o me hodological app oaches. Thei me a-analysis is
pa icula ly ele an o Somalia, gi en he coun y’s high you h unemploymen a e, bu he gene aliz-
abili y o hei indings o agile s a es like Somalia may be limi ed due o go e nance and ins i u ional
4 A. A. MOHAMED ET AL.
di e ences. These s udies sugges ha popula ion g ow h poses a c i ical challenge o employmen c e-
a ion, and a ge ed policies, pa icula ly you h employmen p og ams, a e essen ial.
The e iew o he li e a u e highligh s he complex ela ionship be ween mac oeconomic ac o s such
as GDP g ow h, in la ion, FDI, o eign aid, popula ion g ow h, and employmen . While exis ing esea ch
o e s aluable insigh s in o how hese ac o s in luence employmen , limi ed esea ch has ocused on
Somalia, a coun y wi h unique poli ical and economic challenges. This s udy aims o ill his gap by
using an Au o eg essi e Dis ibu ed Lag (ARDL) model o analyze he sho - e m and long- e m e ec s
o hese mac oeconomic ac o s on employmen ends in Somalia.
Me hodology
This s udy u ilizes ime se ies da a om he Wo ld Bank, co e ing he pe iod om 1991 o 2022. This
pe iod cap u es he c i ical phases o poli ical ins abili y, economic eco e y, and in e na ional in e en-
ions, allowing o an analysis o mac oeconomic ac o s and hei impac on employmen . The pe iod
was chosen because da a o se e al key a iables a e una ailable be o e 1991 and a e 2022. This ime-
ame p o ides he mos eliable and comple e da ase o accu a e analysis o mac oeconomic ac o s
and employmen ends in Somalia. I examines he ela ionship be ween a iables such as economic
g ow h (GDP), in la ion (INF), o eign di ec in es men (FDI), o eign aid (FAID), and popula ion g ow h
(PG) wi h employmen in Somalia. Table 1 p o ides a summa y o he key a iables used in he analysis,
including hei measu emen s and sou ces.
Au o eg essi e Dis ibu ed Lag (ARDL) model selec ed o analyze bo h he sho - e m and long- e m
ela ionships be ween he a iables. This app oach allows us o examine how selec ed mac oeconomic
a iables impac employmen o e di e en ime pe iods.
The ARDL model was chosen o his s udy due o i s abili y o handle bo h sho - e m and long- e m
ela ionships be ween a iables, which is essen ial o analyzing Somalia’s mac oeconomic da a. Unlike
Johansen’s coin eg a ion me hod, which equi es all a iables o be in eg a ed a he same le el, ARDL
accommoda es a iables ha a e a mix o I(0) and I(1). I also pe o ms well wi h small sample sizes,
making i sui able o his s udy’s 32-yea da ase . Addi ionally, ARDL allows o lexible lag selec ion,
enabling mo e accu a e insigh s in o how a iables like FDI, in la ion, and aid a ec employmen o e
ime. The model’s use o he Bounds Tes ing app oach o coin eg a ion u he enhances i s sui abili y,
allowing o he de ec ion o long- e m ela ionships in mixed-o de da ase s. O e all, ARDL o e s he
lexibili y and obus ness needed o analyze he complex dynamics o mac oeconomic ac o s and
employmen in Somalia.
The ma hema ical o mula ion o he ARDL model is as ollows:
EMP ¼GDP ,þINF ,þFDI ,þFAID ,þPG (1)
Based on he empi ical wo k o Sa kodie and Adams (2018), he ARDL co-in eg a ion equa ion can be
o mula ed as ollows:
EMP ¼a0þb1GDP −1þb2INF −1þb3FDI −1þb4FAID −1þþb5PG −1þXq
i¼0Da1GDP −k
þXp
i¼0Da2INF −kþXp
i¼0Da3FDI −kþXq
i¼0Da4FAID −kþXq
i¼0Da5PG −kþe
Whe e a0 ep esen s he cons an e m, a1,a2,a3,a4,a5a e he coe icien o he sho - un a iables,
b1,b2b3,b4and b5 ep esen he elas ici ies o he long- un pa ame e s, he symbol q deno es he
Table 1. Sou ce and measu emen .
Va iables Measu emen s Sou ces
Employmen (EMP) Employmen - o-popula ion a io (% o popula ion ages 15þ) Wo ld Bank
Economic G ow h GDP g ow h (annual %) Wo ld Bank
In la ion (INF) In la ion, GDP de la o (annual %) Wo ld Bank
Fo eign di ec in es men (FDI) Fo eign di ec in es men , ne in lows (BoP, cu en US$) Wo ld Bank
Fo eign Aid (FAID) Ne o icial de elopmen assis ance ecei ed (cu en US$) Wo ld Bank
Popula ion G ow h (PG) Annual popula ion g ow h (%) Wo ld Bank
No e. Da a compiled by he au ho s om he Wo ld Bank.
COGENT ECONOMICS & FINANCE 5
op imal lags o he dependen a iable, while p indica es he op imal lags o he independen a iables,
Dsigni ies he i s di e ence, ep esen ing he sho - un a iables, and e is he e o e m.
Ou analysis s a s wi h a uni oo es . Then, we will pe o m he ARDL model o es he long- e m
and sho - e m ela ionships be ween he a iables. Finally, we will conduc diagnos ic and s abili y es s,
speci ically ocusing on se ial co ela ion, he e oskedas ici y, and no mali y es s.
The mac o economic ac o s, inclouding GDP, in la ion, FDI, o eign aid, and popula ion g ow h a e
expec ed o ha e signi ican impac s on employmen . Economic g ow h is ypically associa ed wi h posi-
i e employmen e ec s (Mush aq e al., 2022), while in la ion’s impac can be mixed, in luencing pu -
chasing powe and cos o li ing (Angelo , 2023). FDI is expec ed o boos job c ea ion (Rong e al.,
2020), o eign aid can suppo employmen h ough in as uc u e and de elopmen p ojec s (Tan ee
e al., 2019), and popula ion g ow h a ec s labo supply and demand dynamics (Adeosun & Popogbe,
2021).
Da a limi a ions
While his s udy elies on mac oeconomic da a om he Wo ld Bank (1991–2022), se e al limi a ions
mus be acknowledged, especially conside ing Somalia’s poli ical and economic ins abili y.
Somalia’s ola ile poli ical en i onmen and weak ins i u ions may lead o gaps and inaccu acies in
he da a, pa icula ly due o di icul ies in cap u ing he in o mal economy, which o ms a la ge pa o
he coun y’s economic ac i i ies.
The employmen da a, based on he employmen - o-popula ion a io, may no ully cap u e in o mal
employmen . Addi ionally, much o he da a o Somalia is modeled, leading o po en ial inaccu acies in
e lec ing he ac ual employmen si ua ion.
Pe iods o poli ical ins abili y, such as du ing he ci il wa , may ha e esul ed in incomple e o es i-
ma ed da a, pa icula ly in ea lie yea s. Missing alues o un eliable es ima ions om hese pe iods may
a ec he p ecision o he s udy’s analysis.
FDI and o eign aid da a may no always cap u e smalle in es men s o accoun o aid disbu se-
men s ied o poli ical objec i es, which may no di ec ly con ibu e o employmen g ow h.
Gi en he po en ial da a gaps, assump ions we e made in he analysis, especially ega ding da a
s a iona i y and he non-causal ela ionship be ween a iables like FDI and employmen . This limi s he
p ecision o he s udy’s indings.
Resul s
Table 2 p o ides a summa y o he desc ip i e s a is ics o he key a iables in his s udy, including
employmen (EMP), economic g ow h (GDP), in la ion (INF), o eign di ec in es men (FDI), o eign aid
(FAID), and popula ion g ow h (PG). Employmen (EMP) shows a mean o 5.85, wi h low a iabili y
(s anda d de ia ion o 0.42), and a sligh nega i e skewness, indica ing a le -skewed dis ibu ion.
Economic g ow h (GDP) e eals signi ican a iabili y (s anda d de ia ion o 5.58) and a p onounced le
skew (−2.47), e lec ing pe iods o nega i e g ow h common in ola ile economies. In la ion (INF)
p esen s a mean o 13.17% wi h high a iabili y, indica ing pe iods o ex eme in la ion, while FDI
Table 2. Desc ip i e s a is ics (Compiled by he au ho s by using EViews 12).
EMP GDP INF FDI FAID PG
Mean 5.852967 4.330558 13.170520 1.54E þ08 8.03E þ08 2.881176
Median 6.030650 6.694352 7.309868 91500000. 5.94E þ08 3.431286
Maximum 6.276559 9.946800 55.814750 6.36E þ08 3.04E þ09 4.994928
Minimum 5.049702 −17.846990 −15.346900 −479000.0 81180000 −4.629117
S d. De . 0.418555 5.575870 16.390170 1.98E þ08 7.54E þ08 2.132495
Skewness −0.625337 −2.465537 1.004091 1.119993 1.188856 −3.004375
Ku osis 1.874380 9.527304 3.692919 28.73513 27.84964 11.401080
Ja que-Be a 3.774943 89.228260 6.017246 6.690078 8.631796 142.244300
P obabili y 0.151454 0.000000 0.049360 0.035259 0.013355 0.000000
Sum 187.294900 138.577900 421.456800 4.92E þ09 2.57E þ10 92.197650
Sum Sq. De . 5.430844 963.800000 8327.772000 1.21E þ18 1.76E þ19 122.039500
Obse a ions 32 32 32 32 32 32
6 A. A. MOHAMED ET AL.
displays subs an ial a iabili y (s anda d de ia ion o $198 million), sugges ing la ge luc ua ions in ne
in lows. Simila ly, o eign aid (FAID) has a igh -skewed dis ibu ion, wi h an a e age o $803 million in
annual aid, ma ked by signi ican a iabili y (s anda d de ia ion o $754 million). Popula ion g ow h (PG)
shows a le -skewed dis ibu ion wi h a mean o 2.88% and signi ican a iabili y.
The Ja que-Be a es esul s indica e ha se e al a iables de ia e om no mali y, especially GDP, FDI,
and FAID, which exhibi lep oku ic dis ibu ions, signaling ex eme alues and dis ibu ional ou lie s.
These esul s unde sco e he need o cau ion when applying me hods ha assume no mal dis ibu ions,
pa icula ly gi en he ola ili y o mac oeconomic a iables in Somalia.
The uni oo es s using he Augmen ed Dickey-Fulle (ADF) es in Table 3 de e mine he s a iona i y
o each a iable a bo h he le el and i s di e ence. The null hypo hesis (H0) o hese es s is ha he
se ies has a uni oo (i.e. he se ies is non-s a iona y), while he al e na i e hypo hesis (H1) is ha he
se ies does no ha e a uni oo (i.e. he se ies is s a iona y). The esul s indica e ha economic g ow h
(GDP) and popula ion g ow h (PG) a e s a iona y a he le el o bo h in e cep and end & in e cep ,
signi ying hey a e in eg a ed o o de I(0) and ejec ing he null hypo hesis a he le el. Con e sely,
in la ion (INF), o eign di ec in es men (FDI), and o eign aid (FAID) a e no s a iona y a he le el bu
become s a iona y a he i s di e ence, indica ing hey a e in eg a ed o o de I(1) and ejec ing he
null hypo hesis a he i s di e ence. Employmen (EMP), howe e , is no s a iona y a bo h he le el
and i s di e ence. These mixed in eg a ion o de s o he a iables jus i y he use o he ARDL model
o explo e bo h sho - e m and long- e m ela ionships among he a iables. Fu he analysis will in ol e
he ARDL bounds es o check o coin eg a ion and subsequen ly es ima ing he ARDL model o de i e
signi ican insigh s in o he dynamics a ec ing employmen in Somalia.
The Spea man co ela ion in Table 4 esul s e eal ha EMP has a s ong posi i e co ela ion wi h
FDI, indica ing ha highe le els o o eign di ec in es men a e associa ed wi h inc eased employmen .
Con e sely, he e is a s ong nega i e co ela ion be ween EMP and INF, sugges ing ha highe in la ion
ends o dec ease employmen le els. GDP shows a mode a e posi i e co ela ion wi h EMP, implying
ha economic g ow h suppo s employmen . These indings p o ide a ounda ional unde s anding o
how hese mac oeconomic ac o s impac employmen in Somalia. The nex s ep is o es ima e he
ARDL model o quan i y he sho - e m and long- e m e ec s o hese independen a iables on employ-
men , gi en he es ablished coin eg a ion.
Con ig a ion es
The ARDL bounds es is used o de e mine whe he a long- e m ela ionship (coin eg a ion) exis s
be ween he a iables in he model. The es compa es he calcula ed F-s a is ic o he lowe and uppe
c i ical alues a a ious signi icance le els (1%, 5%, 10%). I he F-s a is ic exceeds he uppe bound a
Table 3. Uni oo es (Compiled by he au ho s by using EViews 12).
Va iables
Le el Fi s di e ence
In e cep T end & in e cep In e cep T end & in e cep
EMP −2.963972 −3.562882 −2.963972 −3.568379
GDP −2.960411 −3.562882 −2.963972 −3.568379
INF −2.960411 −3.562882 −2.963972 −3.568379
FDI −2.967767 −3.574244 −2.963972 −3.568379
FAID −2.967767 −3.562882 −2.971853 −3.574244
PG −2.960411 −3.562882 −2.963972 −3.568379
No e. and symbolize signi icance a 5% and 1%, espec i ely.
Table 4. Spea man co ela ion es s (Compu ed by he au ho s using EViews 12).
EMP GDP INF FDI FAID PG
EMP 1.00000000 0.36272980 −0.78666760 0.65936500 0.58467854 0.32607234
GDP 0.36272980 1.00000000 −0.55221360 −0.03652330 −0.16589150 0.22210272
INF −0.7866676 −0.55221360 1.00000000 −0.37090650 −0.28191300 −0.10358480
FDI 0.65936500 −0.03652330 −0.37090650 1.00000000 0.92061756 0.16352740
FAID 0.58467854 −0.16589150 −0.28191300 0.92061756 1.00000000 0.06604884
PG 0.32607234 0.22210272 −0.10358480 0.16352740 0.06604884 1.00000000
COGENT ECONOMICS & FINANCE 7
signi ican ly be ween Somalia’s ag icul u e, se ices, and manu ac u ing sec o s. Conduc ing sec o -spe-
ci ic analyses would allow policymake s o design mo e a ge ed in e en ions aimed a boos ing
employmen in he mos ulne able o p omising a eas o he economy.
Las ly, gi en he impac o ex e nal shocks such as global economic c ises, clima e change, and in e -
na ional aid luc ua ions, u u e esea ch should also examine how hese shocks in luence employmen
dynamics in agile economies. By inco po a ing ex e nal ac o s and es ing o hei impac h ough
ec o au o eg ession (VAR) models o dynamic s ochas ic gene al equilib ium (DSGE) models, u u e
s udies can p o ide a mo e comp ehensi e pic u e o how Somalia’s labo ma ke esponds o bo h
in e nal and ex e nal p essu es.
Au ho con ibu ions
Abdikadi Ahmed Mohamed: Concep ualiza ion, Me hodology, Da a Analysis, W i ing - O iginal D a
Abdikani Yusu Abdulle: Li e a u e Re iew, Da a Collec ion, W i ing - Re iew & Edi ing
Mahdi Mohamed Oma : Da a Analysis, W i ing - Re iew & Edi ing
All au ho s ha e ead and app o ed he inal e sion o he manusc ip .
Disclosu e s a emen
No po en ial con lic o in e es was epo ed by he au ho (s).
Funding
This s udy ecei ed inancial suppo om Jamhu iya Uni e si y o Science and Technology.
Abou he au ho s
Abdikadi Ahmed Mohamed holds a Bachelo ’s deg ee in Economics om Mogadishu Uni e si y and a Mas e o
Business Adminis a ion om Jamhu iya Uni e si y o Science and Technology. He is cu en ly a ilia ed wi h
Jamhu iya Uni e si y o Science and Technology, whe e he eaches and conduc s esea ch. His esea ch in e es s
encompass o eign aid, en i onmen al s udies, mig a ion, and economics. Abdikadi has con ibu ed o a ious aca-
demic pape s and p ojec s ocused on he economic and en i onmen al challenges acing Somalia, including o eign
di ec in es men , mig a ion dynamics, and sus ainable de elopmen .
Abdikani Yusu Abdulle holds a Mas e ’s deg ee in Economics Managemen om Uni e si i Sains Malaysia and wo ks
a Jamhu iya Uni e si y o Science and Technology. His esea ch in e es include mac oeconomics, public economics,
and esou ces and ag icul u al economics, wi h a pa icula ocus on he economic de elopmen challenges o
Somalia. Abdikani’s wo k explo es policy implica ions o sus ainable esou ce use, ag icul u al p oduc i i y, and is-
cal e o ms o s imula e long- e m economic g ow h.
Mahdi Mohamed Oma is he Dean o he Facul y o Economics and Managemen a Jamhu iya Uni e si y. His
esea ch in e es s include clima e change, economic g ow h, sus ainable de elopmen , and go e nance. Wi h o e 8
yea s o expe ience in Somali social, economic, and poli ical a ai s, he has con ibu ed o a ious academic and pol-
icy pape s in hese a eas.
ORCID
Abdikadi Ahmed Mohamed h p://o cid.o g/0009-0004-7589-8502
Abdikani Yusu Abdulle h p://o cid.o g/0000-0002-7739-439X
Mahdi Mohamed Oma h p://o cid.o g/0009-0001-1791-4680
Da a a ailabili y s a emen
The da a and ma e ials used and/o analyzed du ing he cu en s udy a e a ailable om he co esponding au ho
upon easonable eques .
14 A. A. MOHAMED ET AL.
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