Job creation, job destruction and reallocation in Sub-Saharan Africa: Firm-level evidence from Kenyan manufacturing sector

Stephen Esaku,Duncan Watson

doi:10.1080/23322039.2020.1782113

Abstract

Is the poor aggregate employment growth of the manufacturing sector in Sub-Saharan African countries the outcome of inadequate job creation or rival forces of job creation and job destruction actin...

Highlights

Is the poor aggregate employment growth of the Kenyan manufacturing sector the outcome of inadequate job creation or the consequence of rival forces of job creation and job destruction acting in opposite direction? Why is unemployment still an obstacle to the bulk of Sub-Saharan African countries? Can limited job creation account for the slow employment growth in subSaharan African countries or there are other factors driving unemployment in these countries? A number of Sub-Saharan African economies have received considerable criticism for the slow growth of employment during the past decades
We can observe that there is positive net employment growth whenever rates of job creation are more than job destruction rates; which is reversed whenever rates of job destruction are greater than rates of job creation
This shows that job creation rates fell by 14.57%, faster than the decline in job destruction rates which only fell by 5.68%

Summary

Introduction

Is the poor aggregate employment growth of the Kenyan manufacturing sector the outcome of inadequate job creation or the consequence of rival forces of job creation and job destruction acting in opposite direction? Why is unemployment still an obstacle to the bulk of Sub-Saharan African countries? Can limited job creation account for the slow employment growth in subSaharan African countries or there are other factors driving unemployment in these countries? A number of Sub-Saharan African economies have received considerable criticism for the slow growth of employment during the past decades. Davis and Haltiwanger (1992) study job flows in the US manufacturing sector and find high rates of annual gross job creation and destruction that average 9.2% and 11.3% respectively. Kerr et al (2014), using the South African data from 2005 to 2011 show that, on average, rates of job creation and destruction in the South African economy averaged 9.9% and 10%, respectively, per year These authors show how nearly 20% of employment is as a result of job reallocation, which is similar to patterns observed in the US economy, lower than what is observed in other developed countries like the UK. Davis and Haltiwanger (1992) find evidence of counter-cyclical nature of job reallocation in the US manufacturing sector reflecting time variation across the sizes of specific firm-level employment activity which are not related to sectoral differences in the average employment response to total fluctuations. We observe that old firms tend to be more uniformly distributed across the size categories than the very young firms

The methodology

Results

Conclusion