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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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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