The Nexus between Higher Education and Unemployment—Evidence from Romania

Abstract

The aim of this research is to analyze, from a macro-economic perspective, the dynamic relationship between higher education and the unemployment rate in Romania. After the political changes at the end of 1989, in Romania the number of individuals enrolled in universities and the number of highly educated graduates increased substantially. Through the research carried out in this article, we analyze whether this explosion of highly educated individuals is sustainable and is a factor in the evolution of the unemployment rate, specifically, whether higher education causes a short and/or a long-run decrease or increase of the unemployment rate, or whether the variables are independent. The autoregressive distributed lag (ARDL) model, the augmented Dickey-Fuller (ADF) procedure, and other econometric techniques specific to the dynamic analysis of time series were used as methodological approaches. The results prove that, at the macro-economic level, higher education and unemployment rate are not co-integrated in the long-run. However, for the analyzed period, there was a significant but modest short-run positive effect of higher education on unemployment rate. Our study emphasizes the importance, for a balanced and sustainable labor market, of correlating the number of individuals enrolled in higher education institutions with the needs of employers. We underline that a non-sustainable increase in the number of highly educated graduates may become a cause of the increase of unemployment and permanent migration of highly educated individuals. The obtained results can be useful for policy makers and can contribute to the development of effective strategies focused on higher education.