GDP, Unemployment, Government Expenditure in Bangladesh: Testing the Relevance of Okun’s Law

Author:S.K.S. Yadav, Imran Hosen, Dhwani Gupta

Abstract:
This study examines the dynamic relationship among Gross Domestic Product (GDP), unemployment, and government expenditure in Bangladesh from 2010 to 2025. The analysis highlights a period of robust economic performance, with GDP growth consistently averaging above 6%, driven primarily by manufacturing, garment exports, and the service sector. Despite the significant disruption caused by the COVID-19 pandemic in 2020, which saw growth dip to 3.45%, the economy demonstrated structural resilience and a rapid recovery. Concurrently, government expenditure has expanded significantly as a fiscal tool for development, particularly through large-scale infrastructure projects and social safety nets. Public spending rose from BDT 1,217 billion in 2016 to over BDT 2,218 billion by 2025. However, this expansionary stance has not fully addressed labor market inefficiencies. Unemployment has remained relatively stable between 3% and 5%, suggesting that the link between GDP growth and job creation is weak, thereby offering only limited support for Okun’s Law in the Bangladeshi context. The study identifies persistent structural challenges, including high youth unemployment and skill mismatches, and concludes that inclusive growth policies and labor market reforms are essential to translate macroeconomic gains into sustainable employment generation.

Keywords:GDP Growth, Unemployment, Government Expenditure, Fiscal Policy, Bangladesh, Okun’s Law, Macroeconomic Resilience.

DOI:10.46333/ijtc/15/1/1

International Journal of Trade & Commerce (Vol: 15 Issue:1)