The Relationship between the Generation of Electricity from Renewable Resources and Unemployment: An Empirical Study on the Egyptian Economy

Abstract

Currently, there is a global trend towards the use of renewable energy resources. This is due to their benefits in terms of economic diversification, job creation, and sustainable development. Given the suffering of the Egyptian economy from the chronic unemployment problem, this paper has adopted the effect of electricity generation from renewable resources on unemployment. It tests the hypothesis which implies an inverse relationship between renewable electricity generation and unemployment rate in Egypt. By using Autoregressive Distributed Lag (ARDL) approach to identify the effects in the short and long run during the period (1989-2013), it has been found that the hypothesis was achieved in the long run only. This is due to the fact that renewable energy projects in their establishment stages focus on capital intensity more than labour intensity, but with time both direct and indirect employment effects start to emerge. The econometric results agree in the presence of a significant negative impact of both economic growth and investments on the unemployment rate.