Employment and Development in the Developing World: Taking Stock of What Research Can Teach Us

Productivity growth and structural change are generally considered to be important determinants of economic growth. However recent research revealed that they do not necessarily lead to higher growth and employment rates. Recent studies, drawing on data from developing countries, showed that only the “right” kind of productivity growth resulted in higher employment rates. Enterprises in Africa and Latin America caught up in matters of technology; however, this process resulted in a substitution of employment by technology. The same is true for structural change; only the “right” kind of structural change caused more growth and employment. Whereas in Asia, labour shifted from the less productive agricultural sector to more productive sectors, in Africa and Latin America, labour switched from a relatively productive agricultural sector to even less productive informal sectors. Thus, policies have to focus on promoting the “right” kind of productivity growth and structural change. Possible means to this end could be avoiding an over-valuation of the local currency, as well as protecting local infant industries