Labour-Entrepreneurship Substitution Mechanism: Determining Growth, Employment and Wage in Nigeria

Finding a recipe that unlocks rapid growth and job creation should be the priority of emerging economies. Several theories of growth, employment and wage determination were efficient for certain economies at different periods, but not for other emerging economies like Nigeria. This study presents the Labour-Entrepreneurship Substitution mechanism as an idealistic model of growth, employment and wage determination. It is uniquely designed to accumulate capital, substitute labour for entrepreneurship as prospective supply of labour grows beyond its initial level, boost employment and output via new investments. Error correction mechanism of Autoregressive least square technique was used to measure the influence of labour-entrepreneurship substitution rate on the ‘new investment', and the t-statistics, adopting Benferron's multiple comparison adjusted probabilities was further used to measure the significance of the ‘new investment' in determining gross domestic product in Nigeria. The labour-entrepreneurship substitution rate showed significant and positive impact on the new investment as the new investment also showed significant and positive impact on economic growth in Nigeria. Emerging and developed countries should develop the labour-entrepreneurship substitution as this will increase investment and output while creating full employment in the country.