Factors Affecting Unemployment Rate in Canada and Denmark

Abstract

This study investigates the impact of labor force, government expenditure, gross capital formation, foreign direct investment, energy and domestic credit to private sector on unemployment in Canada and Denmark. Annual data is collected from 1980 to 2021 from world development indicator. Johansen Cointegration approach is used to identify the relationship between dependent and independent variables. The results show that labor force and government expenditure positively and significantly impact unemployment in long run in the case of Canada. While the gross capital formation, energy and domestic credit to private sector have negative but significant impact on unemployment. In short run labor force, GCF, energy and domestic credit to private sector has positive and significant impact on unemployment. On the other hand, in the case of Denmark, labor force and government expenditure have positive and significant impact on unemployment. Whereas gross capital formation, energy, FDI and domestic credit to private sector have significant and negative impact on unemployment while in short run FDI shows negative and significant impact on unemployment.