Labour Market Dynamics, Environmental Degradation, and Employment Determinants in Ghana: The Interplay of Industrialisation, Trade Openness, and Carbon Intensity

Abstract

This study examines the macroeconomic and environmental determinants of employment dynamics in Ghana, highlighting the nexus between energy-intensive manufacturing development, trade openness, capital formation, and carbon dioxide (CO2) emissions. Utilising annual time-series data from 1970 to 2023, the study applies the Autoregressive Distributed Lag (ARDL) bounds-testing procedure, error-correction modelling, and VAR-based Granger causality analysis to evaluate short- and long-run employment responses. The cointegration analysis confirms a robust long-run equilibrium relationship among employment, manufacturing value-added, trade openness, capital accumulation, and carbon emissions. The error-correction coefficient is negative and statistically significant, confirming that short-run disequilibrium adjusts toward long-run equilibrium, albeit slowly. The empirical results reveal that manufacturing value-added exerts a statistically significant negative effect on employment, indicating that Ghana’s industrial growth path, driven by carbon- and energy-intensive manufacturing, has lacked sufficient labour-absorbing capacity. Conversely, trade openness demonstrates a positive employment effect through short-run lagged dynamics and Granger causality, indicating that external sector integration yields employment benefits when domestic firms capitalise on expanded market access. Capital formation exhibits a weak and statistically insignificant effect on labour demand, suggesting that capital accumulation has not been adequately aligned with job creation. Furthermore, including CO2 emissions highlights the structural trade-off between environmental degradation and employment expansion. The study concludes that achieving employment-rich, sustainable transformation requires green manufacturing policies targeting labour-intensive, energy-efficient production; trade strategies that foster local value addition; and investment frameworks that align capital deepening with environmental sustainability and workforce employability.