Determinants of Labor Demand in Somalia

Abstract

Purpose: The purpose of this study was to examine the determinants of labor demand in Somalia. Methodology: The ordinary least square method (regression analysis) was utilized in the analysis of the data. Regression analysis is a tool commonly utilized in the determining of the existence of a relationship between variables; using historical data. The simple regression function employed consisted of one dependent variable and three independent variables. The dependent variable was employment, and the independent variables were gross domestic product, export and investment. In addition, descriptive statistics were utilized in the analysis of the data. Graphs were also used in the study to represent the data. The study used secondary data from the World Bank, IMF, and SESRIC in the rage of 45 years from 1970 to 2015. The study used the efficiency wage model to develop the determinants of labor demand. Findings: The study found that there is a positive relationship between gross domestic product and employment of Somalia. That means, if gross domestic product increase employment will also increase. The study also found that there was a positive and statically significant between investment and employment in Somalia, and that there was a positive and statically insignificant between export and and employment in Somalia. Recommendation: This study recommends that the policy should make policies that attract foreigners and Somali people living in other countries to invest Somalia, because investment plays an important role in determining the level of employment. To achieve these policies, first, the government should focus on the ensuring the security of the country because the main challenge affecting foreigners is insecurity.