Determinants of Unemployment in Sabah: Long-Run and Short-Run Analysis

Abstract

This study explores the determinants of unemployment in Sabah from 1982 to 2020. This study
utilised the Autoregressive Distributed Lag order (ARDL) model to investigate the linear
relationship between job vacancies, economic growth, government spending, labour force
participation, and inflation on unemployment. Job vacancies were disaggregated into five types
based on occupations to better understand the symmetric relationship between unemployment
and vacancies based on the Beveridge curve theory. Alongside Beveridge Curve theory, this
study included Okun’s Law, Keynesian theory of fiscal policy, and Phillips curve theory, which
explain the factors of unemployment. Findings revealed that unemployment was influenced by
economic growth (GDP) and inflation (CPI) in Sabah.