Testing Unemployment–Entrepreneurship Nexus in Namibia Using the Schumpeterian Approach

Abstract

This study uses time series data from the World Bank database to examine the relationship between unemployment and entrepreneurship in Namibia. We applied the Augmented Dickey–Fuller and Phillips–Perron tests for unit root testing and found all the variables to be stationary after the first difference. Given that, we employed the Johansen–Juselius test to measure cointegration, which revealed the absence of long-run relationships between the variables. Hence, we performed a Vector Autoregressive model to estimate the short-run relationships and found that Namibia exhibits both the refugee and Schumpeter effects. Finally, we measured the direction of causality using the Pairwise Granger causality test, and the results revealed that none of the variables Granger causes the other, implying that they are all independent of each other. This implies that the significance of entrepreneurship in addressing unemployment in Namibia is limited in the long run, mostly owing to the absence of sustainable business ventures. Therefore, we recommend prioritizing the development of policies to tackle unemployment through sustainable entrepreneurship.