Higher Education Development and Unemployment in Pakistan: Evidence from Structural Break Testing

Abstract

This study investigates the relationship between higher education development and unemployment in Pakistan by using the annual time series data from the period of 1973 to 2013. The ARDL bound testing cointegration approach, Johansen and Juselius cointegration approach and Gregory and Hansen structural break cointegration approach confirm the valid long-run relationship between higher education development and unemployment. Results of long-run analysis indicate the negative and significant impact of higher education development on unemployment in Pakistan. Results of variance decomposition method confirm the valid unidirectional causal relationship of higher education development with unemployment in Pakistan. The direction of a causal relationship is run from higher education development to unemployment. Results of rolling window analysis show that the coefficient of higher education development has remained negative for last 15 years since 1999. It is clear from our findings that higher education commission plays an important role in creating the employment opportunities in Pakistan, which also leads to economic growth. It is recommended that policy makers should make policies to strengthen the higher education commission. Policy makers should make policies which are designed for promoting the fixed capital investments and increasing job opportunities.