Draft Proposal

RHINE-WAAL UNIVERSITY OF APPLIED SCIENCES

FACULTY OF SOCIETY AND ECONOMICS RESEARCH

PROPOSAL
DRAFT RESEARCH PROPOSAL SUMMER SEMESTER
2015

Module “Methods in Finance”

Lecture “Research Methods”

Submitted To,

Prof. Dr. Gernot Müller

Submitted by,

Name- Md. Faisal Aziz

Matriculation-18666

Topic: Analysis of labor market conditions and unemployment in

the European Union
 Draft Proposal

Topics: Analysis of labor market conditions and unemployment in the European Union.

Problem statement: “cyclical unemployment effects on labor market condition in European

Union.”

1. Introduction:

1.1 Overview:

Labor markets function through the interaction of workers and employers. Labor economics
looks at the suppliers of labor services (workers), the demands of labor services (employers), and
attempts to understand the resulting pattern of wages, employment, and income.

Unemployment is the condition and extent of joblessness within an economy, measured in terms
of the unemployment rate--the number of unemployed workers divided by the total civilian labor
force. The history of unemployment is the history of industrialization (Sinha, 2006).
Unemployment levels are increasing dramatically in many parts of the world because of the
major causes such as overpopulation, traditionalism, and ignorance. Moreover, more often, the
demand for jobs is higher than what is being offered in the market. Economists classify various
types of unemployment. Cyclical, frictional, structural and classical, seasonal, hardcore and
hidden are the sub-types and these kinds of unemployment may combine different types.

1.2 Problem Statement:

Despite its potentially damaging social and economic impact, the European crisis,
unemployment has had a relatively low profile – European policy makers have always given the
impression they are more concerned about appeasing bond markets and low inflation than
tackling the more pressing problem of unemployment. There has been a reluctance to tackle the
fundamental deficiency of aggregate demand which is leading to lower growth and falling
employment. Efforts to reduce unemployment have centered on talk of more flexible labor
markets. This may be part of the solution for structural unemployment, but increasing labor
market flexibility alone cannot deal with the cyclical unemployment. As we know labor market
condition can be determine by unemployment situation. So, cyclical unemployment which is
experienced by European Union will be appropriate issue for this proposal. My problem
statement is “cyclical unemployment effects on labor market condition in European Union”.
 Draft Proposal

1.3 Objective of the research:

The objective behind this research is that I am expecting to come up the end result of convenient
and fruitful solution that can determine my understanding regarding research topic. My research
will be focused on solving the following aspects:

A. After considering the data and analyzing them our research will be able to find out how
GDP and productivity of labor related with unemployment.
B. I will try to find out wage or income impact on unemployment by determining labor
demand.
C. Interest rate effects on investment and that indicates labor demand.
D. Consumption spending of household effects on economy that leads to labor depends
positively or negatively.
E. Government spending, net export and import effects on labor demand

Finally I will try to focus the cyclical unemployment growth, which will determine the
current labor market condition in term of unemployment.

Research Questions

A. What are the factors that affect to the further deepening of unemployment in the society?
B. What are the roles of my research objectives toward unemployment?
C. What are the causes and effects of cyclical unemployment in the economic growth of a
nation?
D. How does one’s Wage affect unemployment and inflation?
E. How does unemployment describe labor market condition?

2. Methodology:

2.1 Data Selection:

In my research, I am intending to find out the effect of cyclical unemployment effects on labor
market in European Union. So I will choose maximum member countries of European Union and
also try to analysis data of at least 10 years. In our research paper we are going to focus on the
secondary sources of data. All the data relating our topic have been adopted from the European
Union commission (Eurostat), World Bank i.e. World Development Indicators. We will also
focus on the data of FAO, UN and other reliable sources

2.2 Economic model:

For this research, will use two economics models

a. Keynesian unemployment theory: aggregate expenditure, is deficient causing the

underutilization of inputs (including labour). Aggregate expenditure (AE) can be
 Draft Proposal

increased, according to Keynes, by increasing consumption spending (C), increasing

investment spending (I), increasing government spending (G), or increasing the net of
exports minus imports (X−M).{AD = C + I + G + (X−M)}

b. The IS–LM or Hicks–Hansen model: Is-LM is macroeconomic models which can be

used to determine the aggregate demand of labor in Keynesian unemployment. The IS-
LM Model is used to help and process analyzes the effect of demand shocks on the
economy.

2.3 Hypothesis:

Ho-1: There is no significant effect of interest rate on labor demand regarding cyclical
unemployment.

Ho-2: There is no significant effect of wage on labor demand regarding cyclical unemployment.

Ho-3: There is no significant effect of consumption spending on labor demand regarding cyclical
unemployment

Ho-4: There is no significant effect of government spending on labor demand regarding cyclical
unemployment

Ho-5: There is no significant effect of GDP on labor demand regarding cyclical unemployment

2.3 Econometrics Model Description

We have several independent variables and one dependent variable. For the analysis we are
going to use multiple regression models, where our explanatory variable is labor demand and
explained variable are GDP, wage/income, consumption spending, government spending and
interest rate. We also use an error term to describe the deviations.

The general model as following: Y = β1 + β2X2 + β3X3 + β4X4 + β5X5 + u

Y: is the value added of labor market demand

X2...X5: Explained variables

β1 is a constant term

β2 ... β5: are the vectors of coefficients on the explanatory variables, and

U is the error term

 Draft Proposal

GANTT Chart
Week/Month Date Work Schedule Status Remark

May, 2nd week 10/5/2015 Draft Proposal Submit Done ok

May, 2nd week Draft proposal discussion upcoming

May, 3rd week Literature review overlook again upcoming

Economics Model Discussion upcoming
Econometric model discussion upcoming
Data collection, review upcoming

May, 4th week R-software review Upcoming

Submission of final research

June, Ist week 7/6/2015 proposal Upcoming
June, Ist week Presentation based on proposal Upcoming