Determining the Relationship Between Unemployment and Economic Growth

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The German – Jordan University

Talal Abu-Ghazaleh Graduate School of Business

Managerial Economics

Dr. Yusuf Mansur

Determining the Relationship between Unemployment and Economic Growth

Sandy Salkham Salam Zalloum

Kawther Shabani Khair Al-Najjar

Table of Contents

Title | Page Number |

Literature Review 3

Introduction 3

Problem Description 5

Research Objective 5

Research Analysis, results and conclusions 5

Literature Review:

Economic growth is defined as the increase in the production levels of goods and services. When measured in monetary terms, the increases must occur after adjustments for inflation have been made.

According to the International Labor Organization unemployment refers to people who have been without jobs but are actively seeking employment within the past four weeks.

The literature review states that there is a negative relationship between unemployment and growth, though it should also be mentioned that a positive relation between unemployment and growth could be obtained in the particular ‘creative’ disruption context according to Schumpeter’s study. Again, other arguments claim that the GDP growth rates in developing countries are on average higher than those in developed countries. Yet, the faster population growth in most developing countries is offsetting comparatively faster GDP growth, causing GDP per capita growth rates in these countries to be relatively low or even negative.


Reducing unemployment is a top priority for the Government of Jordan, which is emphasized in its leading strategies: “We Are All Jordan” and the National Agenda. Consistent with those strategies and with the recommendations of donors, the Government’s approach to reducing unemployment has been to create jobs by attracting...