Employment Implications Of Industrialisation In Developing Countries: A Survey

Abstract

The expansion of industrial manufacturing alone cannot be expected to solve the unemployment and underemployment problem in most developing countries. A manufacturing sector employing 20 % of the labour force would need to increase employment by 15 % per year merely to absorb the increment in a total work force growing at an annual rate of 3 %. The required rate of increase of manufacturing output is even greater than 15 % if increases in labour productivity are taken into account.¹ In the light of these orders of magnitude, the contribution of the industrial sector to employment growth over the last decade has been disappointing in many developing economies (see Table 1 ). Ina number of countries in Latin America and Africa, despite significant investments in manufacturing, employment in the sector grew less rapidly than population, and in some cases even declined in absolute terms.

This is the seventh of a series sponsored jointly by the Social Science Research Council and the Royal Economic Society.

I am deeply indebted to Helen Hughes, who suggested the subject of this study, and to the International Bank for Reconstruction and Development, which financed it; it was extremely helpful to do most of the basic work at the Bank’s Office. For helpful discussions and comments on earlier versions, I wish to thank Montek Ahluwalia, Haim Barkai, Charles Blitzer, Michael Bruno, Nicholas Carter, Peter Clark, Carlos Díaz-Alejandro, Kathleen DiTullio, Edgar Edwards, Franklin Fisher, Ralph Hofmeister, Thomas Hutcheson, Timothy King, Ruth Klinov-Malul, Raj Krishna, Keith Marsden, Hal Mason, Dipak Mazumdar, Frank Meissner, Ricardo Moran, Vinod Prakash, Yung Rhee, Hugh Schwartz, Michael Sharpston, Lyn Squire, Ardy Stoutjesdijk, Francisco Thoumi, Raymond Vernon, David Wall, Gordon Winston, participants in the IBRD Industry Division seminar and, in particular, Bela Balassa, Helen Hughes, and Paul Streeten. After it was submitted for publication, the paper benefited significantly from the incisive and detailed comments of Professor W. B. Reddaway, an editor of this JOURNAL, and anonymous referees. I am indebted to Sam Akinsete, Orffa Montoya, and Narayana Poduval for helpful research assistance, and to Naimeh Hadjitarkhani and Vinod Prakash for permission to use their as yet unpublished data. I retain sole responsibility for all views expressed. [Footnotes in square brackets refer to papers received too late for inclusion in the body of the survey.]