Structural change, productivity growth and labor market turbulence in Africa
Emmanuel Buadi Mensah (UNU-MERIT)
Solomon Owusu (UNU-MERIT)
Adam Szirmai (UNU-MERIT/Maastricht University)
Neil Foster-McGregor (UNU-MERIT)
Paper short abstract:
The paper uses new and expanded sector database to analyse the role of structural transformation on the economic growth of Africa. In addition to decomposing labor productivity growth into within and structural change components, we compute the labor market turbulence effect of structural change.
Paper long abstract:
Since the construction of the Africa Sector Database (ASD) at the Groningen Growth and Development Centre (GGDC), there has been a wave of statistical reforms in some of the countries in the ASD leading to significant revaluations of GDP. These reforms have provided a clearer picture of the size and structure of production of the countries involved (Sy, 2015). We update the ASD to reflect these statistical changes. Most importantly, following the methodology of ASD, we expand the ASD by constructing sectoral data for seven new African countries. This has resulted in an expanded database (from the 1960s to 2015) covering about 80% of GDP in Sub-Sahara Africa. With this Expanded Africa Sector Database (EASD), we decompose productivity growth in Africa taking inspiration from McMillan et al (2014); and De Vries et al (2015). Productivity growth has been generally low since the 1960s with moderate contributions from structural change during the import-substitution era and the MDGs era. Although productivity growth from structural change is generally low, regional comparison show that structural change is more rapid in East Africa than the other regions of SSA. To understand whether this moderate structural change contributes to raising the income of the poor, we compute the labor market turbulence effect of structural change. Thus, are poor agricultural workers moving to high income sectors or low income sectors? We then analyze how Employment Protection Legislation affects job reallocation to low and high income sectors and its implication on poverty reduction.
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