Employment Growth in the Selected ECOWAS Countries: Does Capital Flight Matter?

This study examines how capital flight affects employment growth in selected West African countries (Nigeria, Ghana, the Gambia, Liberia and Sierra Leone) from 1990 to 2022. The panel datasets, which include time series and cross-sectional data, were sourced from the World Bank and IMF financial statistics. The analysis involved methods such as descriptive statistics, the Im, Pesaran and Shin (IPS) panel unit root test, fixed effects modelling, and the Hausman test, among others. The findings indicate that FDI outflow has a negative and significant effect on employment during the study period. The coefficient indicated that a 1 unit increase in FDI outflows is associated with a 0.0053-unit decrease in employment in the selected West African countries. This finding highlights the adverse implications of FDI outflows on employment generation during the study period. At the same time, the effect of multilateral debt service on employment is negative and significant at the 5% level. The results showed that employment declined by 0.230 units following a unit increase in multilateral debt service. This indicates that multilateral debt service undermines the potential of West African economies to generate employment for the growing population. There is also evidence of a negative effect of financial account outflows on employment during the study period. Although this finding is not significant at 5% level, it highlights the fact that financial account outflows are detrimental to employment generation in the selected West African countries. The results further showed that personal income payments to non-residents were positively related to employment growth. This finding is not significant at 5% level, thus highlighting that the changes in personal income payments to non-residents do not significantly contribute to employment growth.