Impact of Labor Force and its Determinants on the Economy of Pakistan

Abstract

The paper studies the labor force and the determinants that impact the development of Pakistan’s economy. The study comprises data from 27 years, from 1990-2021, to estimate the long-run relationship between the labor force and its determinants on the growth of Pakistan’s economy. Engel Granger methodology through VECM is applied to analyze long[1]run behavior. The impact of the labor force and its determinants in the form of a log of labor Force (Billions) government expenditure on education (% of GDP), government expenditure on health (% of GDP), and Gross Fixed Capital Formation (% of GDP) on the economic growth of Pakistan in the form of log of Real Gross Domestic (Constant LCU) is analyzed. The empirical analysis shows that government expenditure on education (% of GDP), government expenditure on health (% GDP), and the log of the total labor force have a positive and significant impact on Real GDP (LCU). Keeping in view the observed analysis from the study, the government should try to provide better health and education to enhance the productivity of individuals, which would play an essential role in the economic growth of Pakistan, and the government should increase investment in the capital so that Pakistan could compete with the international world.