MEASURING AND ANALYZING THE IMPACT OF GDP AND PUBLIC EXPENDITURE ON THE OVERALL UNEMPLOYMENT RATE IN IRAQ FOR THE PERIOD (2003-2023)

Abstract

This research gains its importance as it addresses unemployment, which is considered one of the major macroeconomic obstacles in Iraq. The objective of the study was to measure and analyze the impact of GDP and public expenditure on the overall unemployment rate in Iraq during the period (2003-2023). The research covered the basics of GDP, public expenditure, and the overall unemployment rate, in addition to demonstrating the relationship between these variables by analyzing the economic and econometric reality of the research variables. The descriptive method was used to analyze the data on the overall unemployment rate (UR) as the dependent variable, and the data on GDP and public expenditure (GS) as the independent variables. According to the Augmented Dickey-Fuller (ADF) test, it was found that the degree of integration of the research variables is a mix of I(0) and I(1). Therefore, the model was estimated using the Autoregressive Distributed Lag (ARDL) methodology. According to the bounds test for cointegration, there was no cointegration relationship for the model, hence the analysis was conducted only in the short term. The estimated model was successful in all standard quality tests (autocorrelation, heteroscedasticity, normal distribution of residuals), and was also stable according to the CUSUM and CUSUM OF SQUARE tests. The main findings of the research were that the structure of Iraq's GDP still suffers from significant imbalance, the size of public expenditure in Iraq largely depends on the increase in oil revenues, and the average overall unemployment rate during the study period was 11.2%, which is higher than the globally acceptable rates of 2% - 5%. The research provided several recommendations, most notably that Iraq should work on diversifying its sources of income and increasing the contribution of non-oil activities to its GDP and revenues to prevent them from being affected by fluctuations in global oil prices. Iraq should develop future plans to reduce overall unemployment rates, absorb the increase in the labor force, focus on education and technological development, and give the private sector more opportunities to increase its contribution to economic activity to provide more job opportunities and absorb more labor force. Additionally, Iraq should increase investment in all sectors and raise the percentage of government investment expenditure to reduce the unemployment rate and prevent its development and repercussions.