The relationship between economic growth and employment in Saudi private firms

Abstract EN

The main objective of this paper is to investigate the relationship between the economic growth and employment in Saudi private firms.

The cointegration, error correction model, and Granger causality techniques were used to determine the long run equilibrium relationship and the direction of the causality in both short and long runs.

The study covers the period from 1973 to 2002.

The cointegration test indicates a long-run equilibrium relationship between economic growth and employment.

Error correction model and Granger causality test provide that there exists unidirectional causality from economic growth to employment not vice versa in the short run and long run as well.

This result suggests that the Saudi private firms should focus on the quality of hired labor to increase their productivity via technological improvements in order for employment to play bigger rule on economic growth.