This study seeks to determine economic variables that jointly mediate upon government expenditure and unemployment in Nigeria and in proven cases of mediation, determine the type of mediation that exist. It compares the two methods of calculating indirect effect which are product of coefficient and difference of coefficients respectively. Furthermore, the study compares the three methods of testing the significance of indirect effect vis-a-vis Sobel's test, Aroian test and Goodman's test. The differences in these three tests are due to variations in the methods of standard error computation. This study further proposed extensions for the three variations in methods of standard error computation for a case of two mediator which may also be extended for more than two mediator cases. The results show that a combination of any two of labour force population, interest rate and inflation showed a significant evidence of partial mediation. The result of indirect effect computation shows that the method of product of coefficient gave a slightly higher result when compared to that of difference of coefficient. The proposed extension of Sobel, Aroian and Goodman tests gave the same result for all cases as their standard errors are the same. The study thus recommends employing some variable selection techniques in subsequent studies which may improve mediational results; further studies may to be carried out to seek methods of ascertaining the direction of relationship of indirect effect, other than those of the regression models; and finally studies may be carried out to determine the effect of multicolinearity on mediation results.
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