Structural change, productivity growth and labour market turbulence in Africa
Emmanuel Buadi Mensah, Solomon Owusu, Neil Foster-McGregor & Adam Szirmai
#2018-025
This paper combines a standard decomposition of labour productivity with
a decomposition of labour market turbulence to study the role of
structural change and job reallocation in the economic growth
performance of African countries over the past fifty years using an
updated and expanded version of the Africa Sector Database (ASD)
developed by the Groningen Growth and Development Centre (GGDC). The
results show that productivity growth has been generally low since the
1960s with moderate contributions from structural change across the
entire period. Although productivity growth from structural change is
generally low, a regional comparison shows that structural change is
more rapid in East Africa than in the other regions of sub-Saharan
Africa (SSA). While structural change accounts for more than half of the
labour productivity growth in East Africa, within-sector productivity
growth accounts for more than half of the labour productivity growth in
West Africa and Southern Africa. Structural change is characterised by a
net reallocation of workers across different sectors. As such, we
compute the labour market turbulence effect of structural change. The
turbulence effect of structural change has been mostly felt in the
Service Sector due to volatile demand and the high level of informality.
The paper further makes the first attempt to estimate the effect of
labour market flexibility on job reallocation in Africa. The results
show that more rigid labour markets reduce job reallocation across
sectors impeding structural change and productivity growth in Africa.
Keywords: Labour Market Turbulence, Productivity Growth, and Structural
Change
JEL Classification: O11, O14, O41, O43, O57, J21