Question

What are the reasons of unemployment in Developing countries and how these issues
are encountered?

Answer 1

Unemployment is a big issue in developing countries.

Reasons are as below:

No.1) inadequate capital: investors do not have much capital to invest. This restricts expansions in new projects and developments of old project. Thus, new employment opportunity becomes very limited.

How to encounter: the government should come forward with foreign direct investments (FDI). This increases capital formation in the country.

No.2) inadequate aggregate demand: purchasing power of people is low in developing countries. This does not encourage producers and suppliers. Although they keep prices low, demand is still in the lower side. It makes their production limited with limited labor force. This unemployment issue becomes chronic.

How to encounter: the government should take adequate monetary/fiscal policy for an increasing money supply. If money supply increases, the aggregate demand of products should be high.

No.3) distribution of land: most of the people in developing countries are land owners and they depend on agricultural income. At the death of land owner, land is distributed to successors. More and more such distribution and division makes the land unfruitful and this increases unemployment.

How to encounter: the succession law should be revised and unnecessary division of land should be stopped. The law-maker should come forward in this regard.