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7 Rev. Eur. Stud. 115 (2015)
Exploring the Relationship between Economic Growth and Employment in the Czech Republic and Belgium

handle is hein.journals/rveurost7 and id is 2773 raw text is: Review of European Studies; Vol. 7, No. 11; 2015 ISSN 1918-7173 E-ISSN 1918-7181 Published by Canadian Center of Science and Education Exploring the Relationship between Economic Growth and Employment in the Czech Republic and Belgium Mansoor Maitah1, Daniel Toth2 & Elena Kuzmenko1 Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences Prague, Czech Republic 2 Department of Economic Theories, Faculty of Economics and Management, Czech University of Life Sciences Prague, Czech Republic Correspondence: Mansoor Maitah, Faculty of Economics and Management, Czech University of Life Sciences Prague, Kamycka 129, Prague 6 16921, Czech Rep. E-mail: Maitah@pefczu.cz Received: March 16, 2015 Accepted: April 23, 2015 Online Published: June 26, 2015 doi: 10.5539/res.v7nl lp115 URL: http://dx.doi.org/10.5539/res.v7nllp115 Abstract The paper addresses the issue of employment policy development and implementation in the selected European countries with a similar economic structure and population, namely the Czech Republic and Belgium. The existing approaches used by Ministries of Labour and Social Affairs are based either on drawing subsidies from EU structural funds within the frameworks of various Operational Programmes or direct job creation that is realized as a consequence of GDP growth. The retrospective observation of the development of such macroeconomic indicators as GDP per capita and employment rate in Belgium reminded us the Okun's law. This encouraged us to verify the inverted version of the latter and conduct a time series analysis with the use of ARIMA model. The conducted calculations revealed the existence of determined relationship between GDP per capita and employment rate, namely with GDP per capita increase by 2% corresponds to an increase in employment by 1%. This relationship applies vice versa as well. The obtained result may be considered as an extension of the classical Okun's law theoretical framework. The main aim was to explore these relationships and on the basis of comparative analysis between macroeconomic indicators in the Czech Republic and Belgium to suggest recommendations aimed at development of employment policies. Keywords: unemployment rate, employment policy, GDP per capita growth, Belgium, Czech Republic 1. Introduction The unemployment being a structural problem is currently one of the most vital social and economic issues in the European Union. The importance of delivering stronger, lasting economic growth and associated with it job creation was emphasized both in the Lisbon Strategy and the EU's growth strategy for the coming decade Europe 2020. According to these documents the proportion of employed population has to achieve up to 75% till the 2020 (Svatogovfi & Kfiba, 2008). The proposed approaches in implementation of employment policies by the Ministries of Labour and Social Affairs should be based either on drawing subsidies from EU structural funds within the frameworks of various Operational Programmes or direct job creation that is realized as a consequence of GDP growth. From the theoretical standpoint employment policies can be designed with the use of either ex-ante or ex-post approaches. Quantities defined in terms of measurements made at the end of the period in question are referred to as ex post; quantities defined in terms of action planned at the beginning of the period in question are referred to as ex ante (Statsoft, 2014). Thus, to be able to implement ex-ante approach it is necessary to conduct first a thorough retrospective, i.e. ex-post, data analysis. With a purpose of effective employment policies' management it would be perfect to know in advance the expected relationship between selected macroeconomic indicators. In this regard theoretical framework of the American economist's Arthur Okun law becomes very interesting. In the twentieth century he developed the idea that if unemployment falls by 1%, GDP grows by 2% and vice versa. Initially this assertion was empirically tested on the US economy in the mid. 1960 and it was valid only if the rate of unemployment is quite low, namely between 3% and 7.5%.

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