Structure Matters: Sectoral drivers of growth and the labour productivity-employment relationship

The paper uses accounting methods to decompose aggregate labour productivity and employment growth into their sectoral components as well as into within-sector and employment reallocation effects for a sample of 81 developed and developing countries using data going back to the mid-1980s. Key findings are that aggregate labour productivity growth in Asia as a whole is driven by as much services as by industry, in spite of strong differences between countries (e.g., with industry dominant in China and services dominant in India) and that within-sector effects on aggregate labour productivity growth are more important than employment reallocation effects, a pattern that holds for all regions. At the aggregate level, the paper identifies a stronger positive relationship between output and employment growth in developed than developing countries, a stronger negative relationship between labour productivity and employment growth in developing than developed countries, and that “jobless growth” is more of a problem for developing countries in Asia than the more slowly-growing countries of Latin America-Caribbean.