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Governance for Structural Transformation in Africa pp 101–143Cite as

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Economic Regulation and Employment Intensity of Output Growth in Sub-Saharan Africa

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Abstract

The impact of economic regulation on the employment elasticity of output growth was examined for a group of 37 Sub-Saharan Africa (SSA) countries in this study. It is argued that market-based conditions may not be enough to generate employment-enhancing growth in a dual-sector economy. Rather, the level of regulation based on institutional capacity of government also provides strong background for improving the relationships. Empirical analysis in the study shows that there is a strong distinction between active regulation and institutional quality in terms of their effects on employment elasticities. Less economic regulation essentially enhances formal sector activities and employment, while the effects on informal and pro-poor employment is not straight-forward. Although overall regulation tends to improve both formal and informal sector employment, labour market flexibility tends to worsen informal sector employment. It is also found that intersectoral integration and adjustments play little roles in ensuring employment benefits from output growth when regulations are minimal regulations. There is, therefore, a need for careful balancing of regulations to address structural bottlenecks, improve informal sector activities and employment and ensure pro-poor growth in the region.

Prepared for the 17th Nordic conference on development economics 2018, 11–12 June 2018, Helsinki, Finland.

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Author information

Authors and Affiliations

  1. Department of Economics and Statistics, University of Benin, Benin City, Nigeria

    Abidemi C. Adegboye

  2. Department of Finance and Economics, Benson Idahosa University, Benin City, Nigeria

    Monday I. Egharevba & Joel Edafe

Authors
  1. Abidemi C. Adegboye
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  2. Monday I. Egharevba
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  3. Joel Edafe
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Editor information

Editors and Affiliations

  1. Economic Commission for Africa (ECA), Addis Ababa, Ethiopia

    Adam B. Elhiraika

  2. Economic Commission for Africa (ECA), Addis Ababa, Ethiopia

    Gamal Ibrahim

  3. Economic Commission for Africa (ECA), Addis Ababa, Ethiopia

    William Davis

Appendix

Appendix

Variables in the Study

Variable

Explanation

Source

Total employment

Total number of individuals employed in the economy (‘000)

ILO World Employment and Social Outlook database, 2016

Male employment

Total number of males in employment (‘000)

ILO World Employment and Social Outlook database, 2016

Female employment

Total number of females in employment (‘000)

ILO World Employment and Social Outlook database, 2016

Youth employment

Total number of youth in employment (‘000)

ILO World Employment and Social Outlook database, 2016

Wage employment

Total number of individuals with wage employment

ILO World Employment and Social Outlook database, 2016

Self-employment

Total number of individuals that are self-employed

ILO World Employment and Social Outlook database, 2016

Extreme poor employment

Extreme poor in employment: The number of jobs that can make an individual to be in extreme poor group

ILO World Employment and Social Outlook database, 2016

Poor employment

Poor individuals in employment

ILO World Employment and Social Outlook database, 2016

Middle-class employment

Middle class in employment

ILO World Employment and Social Outlook database, 2016

Vulnerable employment

Workers typically subject to high levels of precariousness

ILO World Employment and Social Outlook database, 2016

Non-vulnerable employment

Workers typically not subject to high levels of precariousness

ILO World Employment and Social Outlook database, 2016

Share of agriculture (%)

Measured in GDP value added

UNCTAD World Investment Report database

Share of industry (%)

Measured in GDP value added

UNCTAD World Investment Report database

Share of services (%)

Measured in GDP value added

UNCTAD World Investment Report database

GDP growth volatility (%)

Coefficient of variation of GDP growth rate

Base data from World Bank World Development Indicators

Proportion of urban population (%)

Urban population as percentage of total population

World Bank World Development Indicators

Population density

Total pollution as proportion of total landmass

World Bank World Development Indicators

Labour force growth rate (%)

Year-on-year percentage change in labour force

World Bank World Development Indicators

FDI to GDP ratio (%)

Total FDI inflow as percentage of GDP

World Bank World Development Indicators

Share of govt. consumption in GDP

Total government consumption expenditure as percentage of GDP

UNCTAD World Investment Report database

Investment to GDP ratio (%)

Total investment expenditure as percentage of GDP

IMF World Economic Outlook database

Trade openness (%)

Import + export as percentage of GDP

World Bank World Development Indicators

Rent

Proportion of rent-seeking in an economy

World Bank World Development Indicators

Economic freedom index

Overall measure to indicate the level of economic freedom in a country. It is a composite of five indicators. All indicators are standardized on a 0–10 scale, with higher value of the indicator representing more economic freedom

Fraser Institute’s Economic Freedom of the World (EFW) database

Labour market flexibility

A composite measure of labour maker flexibility and indicators of labour market flexibility in six policy areas: minimum wage; hiring and firing regulation; centralized collective wage bargaining; mandated cost of hiring; mandated cost of work dismissal and conscription

Fraser Institute’s Economic Freedom of the World (EFW) database

Legal system and property rights

A composite measure of the effectiveness of legal system and adherence to property rights in a country. The indicator is standardized on a 0–10 scale, with higher value of the indicator representing better system

Fraser Institute’s Economic Freedom of the World (EFW) database

Govt participation in economic activities

A composite measure of the rate of government participation and size in a country. The indicator is standardized on a 0–10 scale, with higher value of the indicator representing less government involvement

Fraser Institute’s Economic Freedom of the World (EFW) database

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Adegboye, A.C., Egharevba, M.I., Edafe, J. (2019). Economic Regulation and Employment Intensity of Output Growth in Sub-Saharan Africa. In: Elhiraika, A., Ibrahim, G., Davis, W. (eds) Governance for Structural Transformation in Africa. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-03964-6_4

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  • DOI: https://doi.org/10.1007/978-3-030-03964-6_4

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