The Impact of Foreign Trade on Employment in Pakistan

Abstract

This study investigates the relationship between foreign trade and employment in Pakistan from 2000 to 2022, employing the Johansen co-integration approach and vector error correction model (VECM) as econometric methods. The variables examined include employment in industry, services, and agriculture (EMP), along with exports (EX) and imports (IM). The results indicate a long-term connection among these variables, showing that higher exports positively affect employment in Pakistan, while increasing imports have a negative impact, leading to reduced production and labour displacement. The study recommends the government to prioritize export promotion as a strategy to tackle unemployment, as it is expected to have a significant positive effect on employment in the long run. Additionally, measures to curb excessive imports, which have adverse implications for employment, can contribute to improving the employment situation in the country.