Abstract:
The crux of this study was to determine the influence of labour underutilization on output growth in Nigeria using a linear production function. With data of the range 1991 to 2019 which were analysed using the ordinary least squares (OLS), fully modified OLS, and dynamic OLS, the result indicated that the effect of labour force participation rate and employment-population ratio has been positive and significant. Meanwhile, underutilization of labour (unemployment) has been wielding a negative and substantial effect on output growth in Nigeria validating the prediction of Okun's law. In summary, employment generated a positive and significant sway on output growth while unemployment led to output attenuation. With the dynamic OLS being the base model, a unit percent increase in labour force participation rate cause output growth to amplify by 2.0423% on the average; while a unit percent increase in employment to population ratio causes output growth to accelerate by 1.5046% on the average. For the rate of unemployment where the OLS is the base model, a unit percent increase in unemployment is associated with a 1.3512% degeneration in output growth. This points to the fact that for Nigeria to accelerate its growth, there is a need for actionable policies to boost labour employment across different sectors of the economy.
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