The Relationship between Growth and Employment Intensity: Evidence for Developing Countries

Abstract

The main objective of this paper is to contribute to the literature on employment-GDP elasticities by assessing the determinants of cross-country variations in employment elasticities, focusing particularly on the role of demographic and macroeconomic variables. Long-term employment–GDP elasticities are estimated using an unbalanced panel of 90 developing countries from 1991 to 2011 using a two steps estimation strategy. The most important results are: (i) Elasticity estimates vary considerably across countries. (ii) Employment elasticities tend to be higher in more advanced and closed countries. (iii) Macroeconomic policies aimed at reducing macroeconomic (price) volatility are found to have significant effect in increasing employment elasticities. (vi) Employment intensity of growth tends to be higher in countries with a larger service sector. (v) Countries with a higher share of urban population are typically characterized by larger employment elasticities.