Exploring the Link between Urban Growth, Industrial Development, and Employment Challenges in Developing Nations: A Comprehensive Analysis

Abstract

Objective: This research aims to investigate the correlation between urbanization, industrialization, and unemployment in low- and middle-income nations, recognizing the critical role of the industrial sector in stabilizing their economies. The study seeks to contribute to the understanding of the dynamics between these variables and their implications for economic development and employment trends.

Research Gap: While the industrial sector's impact on unemployment rates in developing countries has garnered significant attention, there remains a gap in the literature regarding the specific relationships between urbanization, industrialization, and unemployment. This study aims to address this gap by conducting a comprehensive analysis using variable regression analysis, focusing on data from 1990 to 2021.

Design/Methodology/Approach: The study utilizes variable regression analysis as the analytical method and employs data on urban population, industrialization, total unemployment, GDP growth, total labor force, and inflation from the World Development Indicator database. The empirical investigation applies the generalized method of moments approach and utilizes the Augmented Dickey-Fuller test to assess the presence of a unit root in the data, ensuring robustness in the analysis.

The Main Findings: The findings demonstrate that urbanization correlates positively with GDP growth and the overall labor force but exhibits adverse relationships with unemployment, industrialization, and inflation. Conversely, unemployment shows positive associations with the labor force, urbanization, industrialization, and inflation. Furthermore, the results highlight a positive connection between industrialization and GDP growth, while indicating negative associations between industrialization and both urbanization and inflation.

Theoretical / Practical Implications of the Findings: These findings have theoretical implications for understanding the complex interplay between urbanization, industrialization, and unemployment in low- and middle-income countries. They underscore the need for policymakers to focus on enhancing industrialization to mitigate the adverse effects of urbanization and inflation on unemployment rates. Moreover, governments in these countries must prioritize addressing inflationary pressures to ensure sustainable economic growth and employment opportunities for their populations.

Originality/Value: By employing a rigorous analytical approach and utilizing comprehensive datasets, the study provides valuable data and practical implications for policymakers seeking to promote economic stability and reduce unemployment in these regions.