Examining the relationship between entrepreneurship, unemployment and education in South Africa using a VECM approach
by Irrshad Kaseeram; Darma Mahadea
International Journal of Education Economics and Development (IJEED), Vol. 9, No. 3, 2018

Abstract: The economic growth and unemployment challenges that South Africa has been encountering in recent times has shifted researchers' attention to entrepreneurship as a possible growth driver. However, no studies have considered the education level entrepreneurship nexus within a macroeconomic context of high unemployment. This study attempts to fill that gap, through use of yearly data between 1994-2016 to derive a long run co-integrated relationship between entrepreneurship, unemployment and education, together with an error correction mechanism using the Johansen (1991) VAR/VECM approach. A model initially employed some extrapolated data for the total entrepreneurial activity (TEA) series to cover the post-Apartheid period 1994-2016. This model was then compared to a 2001-2016 specification involving actual TEA data. The results from both models found a statistically significant long run relationship between the variables with the diagnostic tests supporting the models. In particular, the results show a significant cointegrating relationship between education, proxied by school enrolment, and entrepreneurship. The results have major implications for the quality of education if South Africa is to escape the low growth trap.

Online publication date: Sun, 26-Aug-2018

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