The Impact of Stock Market Development on Unemployment: Empirical Evidence from South Africa

Sheilla Nyasha, Nicholas M. Odhiambo, Mercy T. Musakwa


In this paper, the impact of stock market development on unemployment in South Africa has been empirically examined using time-series data from 1980 to 2019. The study was motivated by the high level of structural unemployment facing the country, on the one hand, and a well-developed stock market, which compares favourably with those in advanced economies, on the other hand. The study aims to add value to the finance-unemployment literature by using a range of stock market development proxies, namely stock market capitalisation, the total value of stocks traded, and the turnover ratio. Based on the autoregressive distributed lag (ARDL) bounds testing approach, the results of the study revealed that in South Africa, stock market development has a negative impact on unemployment. These results were found to hold, irrespective of the stock market development proxy used and whether the analysis was conducted in the long run or in the short run. Based on these results, it can be concluded that the stock market unambiguously promotes job creation in South Africa. The study, therefore, recommends that policymakers should continue with the implementation of policies aimed at promoting stock market development in order to create more jobs, while at the same time ensuring that other structural challenges facing the labour market are also addressed.

JEL Classification Code: G1, E24


Financial development; stock market development; market-based financial development; unemployment; South Africa, ARDL

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