The Impact of Investment on Job Creation in Middle-Income Arab Countries: An Empirical Study

Abstract

This paper aims to take advantage of the Keynesian approach in framing the relationship between the size of employment and capital accumulation. In addition, the study will try drafting a new approach for calculating the opportunity cost based on defining the job opportunity through the size of investments needed for its creation. This study is based on the assumption that there is a correlation between the increasing employment rates and the size of investments in the economy. In order to test this hypothesis a time cross-sectional data analysis method has been used (Pooled Data) as well as PWT (Penn World Table). The findings showed that there is a strong positive relationship between the net capital formation at constant prices and created jobs. It was also showed that the efficiency of employment is very low in the countries studied but not exceeding 1 per thousand. Hence, it is recommended that economic policy-makers in those researched countries need to focus on improving the investment environment -locally and regionally- in order to mobilize more investment.