The economic impact on unemployment in the labor market (Case study of Iraq from 1990 to 2020)

The problem of unemployment in Iraq is a fundamental problem that the country has been suffering from for decades, and it increased in the years after the Gulf War in 1990. However, the essence of unemployment in Iraq was not repetitive. Still, rather structural behavioural situations resulted from wars, and political and military problems that the Iraqi economy was not able to absorb. The economic blockade imposed on Iraq increased the problem and led to the deterioration of most sectors, especially the oil, agriculture, and public services sectors which led to a significant increase in unemployment. Many studies were conducted on this subject and revealed a weak relationship between GDP growth and unemployment. This can be explained by the rigid structure of the labour market which is dominated by the authorities, and one sector, symbolized by the oil sector, is not labour-intensive and cannot create new job opportunities. The research aimed to study the relationship between unemployment and economic growth in Iraq, specifically focused on the impact of economic growth on unemployment from 1990-2020 using Okun's law. The empirical model exhibited a lack of statistical significance. The findings obtained from the study period in the Iraqi economy do not provide sufficient evidence for validation of Okun's Law. The observed period of research exhibits a remarkably high level of volatility in real GDP growth. The explanation for the insignificant results relates to the volatility of economic growth. The economic activity showed significant fluctuations with a high degree of deviation as a result of the United States occupation and the presence of ISIS throughout the time under investigation. Nevertheless, after considering the potential presence of Type 1 and Type 2 errors, the prediction equation indicates that increases in real GDP do not have a significant impact on unemployment. The results also show that the Jarque-Bera (JB) normal distribution test shows that the residuals are not normally distributed due to the small sample size. Key Words: Economic growth, unemployment, Okun's law.