Publication: GDP-Employment Elasticities across Developing Economies
Loading...
Published
2024-12-03
ISSN
Date
2024-12-03
Editor(s)
Abstract
Economic growth is often associated with welfare gains through job creation. However, the number and quality of new job opportunities created in a growing economy vary across countries and sectors, due in great part to changes in labor productivity. This paper provides estimates of country and sector-specific GDP-employment elasticities based on data from the past two decades, including an evaluation of the predictive power among alternative methodological approaches. The results show that employment elasticities of growth vary significantly across countries and sectors, but are in most cases below 1.0, implying that employment grows less than GDP due to increasing productivity. Across sectors, agriculture has mostly lower elasticity values, becoming negative for more than one-third of developing countries. In addition, increases in labor productivity are associated with reductions in informal employment. These empirical results are in line with the implications of a theoretical model about the relationship between GDP growth, job creation, and labor productivity in economies with varying levels of productivity and informality.
Link to Data Set
Citation
“Burgi, Constantin; Hovhannisyan, Shoghik; Mondragon-Velez, Camilo. 2024. GDP-Employment Elasticities across Developing Economies. Policy Research Working Paper; 10989. © World Bank. http://hdl.handle.net/10986/42488 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication The State of Global Services Trade Policies: Evidence from Recent Data(Washington, DC: World Bank, 2025-10-28)The economic environment for services trade has changed dramatically over the past 15 years, driven by rapid technological progress that has expanded the possibilities for exchanging services. How has trade policy responded to these changes? How do policy stances in a wide range of service sectors compare across economies? With its unprecedented global coverage, the Services Trade Policy Database and the associated Services Trade Restrictions Index, developed jointly by the World Bank and the World Trade Organization, help address these questions. This paper makes three principal contributions. First, it offers an in-depth discussion of the current state of services trade policies and their differences across 134 economies and 34 services subsectors. Second, the paper reveals how recent (2016–22) changes in policy stances have seen progressive liberalization by lower-income economies but stabilization or even slight policy reversals in high-income economies. This dynamic differs fundamentally from the trend that unfolded after the Great Recession over 2008–16. Third, the paper shows the implications of policy changes over the past six years on services trade costs, and it showcases how the Services Trade Policy Database’s regulatory information can inform trade negotiations, regulatory analysis, and policy making. Alongside these contributions, the paper documents updates to the Services Trade Policy Database’s economy and sector coverage and explains the latest methodological improvements made to the World Bank–World Trade Organization Services Trade Restrictions Index.Publication It’s Not (Just) the Tariffs: Rethinking Non-Tariff Measures in a Fragmented Global Economy(Washington, DC: World Bank, 2025-10-22)As tariffs have declined, non-tariff measures (NTMs) have become central to trade policy, especially in high-income countries and regulated sectors like food and green technologies. Although NTMs may serve legitimate goals, they could also sort countries and firms into or out of markets based on compliance capacity and differences in product mix. Documenting recent advances in the estimation of ad valorem equivalents (AVEs), this paper uncovers new patterns of use and exposure of NTMs. High-income countries rely more heavily on NTMs relative to tariffs, while low- and middle-income countries face steeper AVEs on their exports. Firm-level evidence shows that NTMs disproportionately affect smaller firms, leading to market exit and concentration. Poorly designed NTMs can harm productivity and welfare, while coordinated, capacity-aware use can deliver inclusive outcomes. Policy design, transparency, and diagnostics must evolve to reflect the growing role—and risks—of NTMs in a fragmented global trade landscape.Publication The Marshall Plan: Then and Now(Washington, DC: World Bank, 2025-10-14)This paper is a product of the Development Policy Team, Development Economics. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Informal Emissions(World Bank, Washington, DC, 2022-08)Environmental regulations and their enforcement play a critical role in reducing emissions and their devastating effects on humanity and the environment. However, many developing countries have large informal sectors—accounting for more than 70 percent of total employment, that operate outside government control. The presence of the informal sector could have detrimental consequences on the environment as informal firms do not comply with regulations, which could jeopardize the effectiveness of environmental policies. The paper uses reduced form equations to estimate the relationship between both CO2 and non-CO2 emissions per value added and the informal sector measured as the share of informal workers in total across countries. The estimates indicate that emissions per value added in the informal sector are higher as opposed to in the formal sector. At the sector level, higher informality is associated with lower CO2 emissions per value added only in manufacturing and other services sectors. In particular, a one percentage point increase in the share of informal workers in total sector employment reduces the CO2 emissions per value added by 1.44 percent in manufacturing and 1.773 percent in services. This implies that the magnitude of emissions per value added in the formal sector relative to the informal sector is ambiguous. Sector-specific estimations for non-CO2 emissions yield positive significant coefficients for agriculture, trade, mining, and utilities and a negative significant coefficient for manufacturing.Publication Global Job Quality(World Bank, Washington, DC, 2022-08)Measuring job quality across countries has been challenging and has relied typically on a single indicator, such as formality or wages. To contribute to this critical policy issue, this paper presents a first global estimate of job quality departing from microdata. It assembles a harmonized global data set of labor force and household surveys to produce a measure of job quality across four dimensions: sufficient income, access to employment benefits, job stability, and adequate working conditions. The results for 40 developing countries show significant variation in job quality across countries, economic sectors, and sociodemographic characteristics, including age, location, and educational attainment. Countries in the Latin America and the Caribbean region have relatively higher levels of job quality, while countries in Sub-Saharan Africa display the lowest levels of job quality. Most workers in the sectors of finance and business services, public administration, and utilities have, on average, better jobs. Higher education matters in securing greater job quality, while the average job quality of wage employment is relatively similar between men and women but with some variation in income and working conditions.Publication Responses of the Electricity Sector in 120 Economies to the COVID-19 Pandemic(World Bank, Washington, DC, 2022-06-28)This brief provides descriptive evidence of the operational and policy responses of the electricity sector in 120 economies to the early stages of the Coronavirus (COVID-19) pandemic. In addition, to assess the intensity of operational and regulatory actions taken in response to the pandemic, the Brief proposes a COVID-19 electricity sector response measure. This measure comprises seven equally weighted variables that capture either utilities’ or utility regulators’ responses to the pandemic as well as domestic lockdown measures. Data show that most utilities continued issuing new electricity connections for businesses amid the pandemic. In most cases, utilities that continued issuing new electricity connections despite national lockdowns were able to do so due to well-established electronic and automated processes. In general, maintenance works and planned outages continued during the onset of the pandemic, although with some delays and exceptions. Increasingly, delayed electricity payments and defaults became more prevalent, especially among developing economies. Hence, numerous utilities modifed tariff and payment schedules to provide economic relief to clients.Publication How Comparable are Labor Demand Elasticities across Countries?(World Bank, Washington, DC, 2001-08)The authors present the first comparable dynamic panel estimates of labor demand elasticity, using data from Chile, Colombia, and Mexico. They examine the benefits, and limits of the Arellano, and Bond GMM in differences estimator, and the Blundell, and Bond GMM system estimator. They also explore the limitations of such measures for diagnosing flexibility in the labor market. Even accounting for the large variance induced by different estimation techniques, one probably cannot say much about the flexibility of different labor markets based on comparisons of the estimated elasticity of demand. Colombia, for example, which has severe restrictions on firing workers, has much higher long-run wage elasticity than Chile, which has no such restrictions. Three factors make such comparisons difficult: 1) Elasticity differ greatly across industries, so the composition of industry in each country probably affects the aggregate elasticity. Estimates are extremely dependent on the estimation approach, and specification. 2) Even for specific industries, the elasticity of labor demand differs greatly across countries. And the authors find no common pattern of country rankings across industries, which suggests that those differences cannot be attributed solely to systematic characteristics of the countries' labor markets. 3) Estimates for Chile over fifteen years, suggest substantial, and significant variations in elasticity over time. So comparisons across countries depend not only on the industries involved, but also on the sample periods of time used. Estimates change greatly, if not secularly, with sample period.Publication Employing Skilled Expatriates : Benchmarking Skilled Immigration Regimes across Economies(World Bank, Washington, DC, 2013-11)The Employing Skilled Expatriates indicators analyze the skilled immigration regime relevant for foreign direct investment across 93 economies to provide comparable information about this regulatory space. The indicators focus on restrictions that control the inflow of skilled immigrants (quotas); the ease of hiring skilled expatriates (time and procedural steps to obtain a temporary work permit, existence of online application systems, availability of a one-stop shop and fast-tracking option); and the existence of a path to permanent residency and citizenship as well as the existence of spousal work permits. As governments increasingly seek to attract foreign direct investment as a driver of long-term development, reforming the investment climate -- including the skilled immigration regime -- is one policy option to consider. This analysis shows a positive correlation between the Employing Skilled Expatriates index and foreign direct investment inflows. As measured by the Employing Skilled Expatriates index, there is room for economies with a need for skilled workers to improve their immigration regimes as one means of attracting more foreign direct investment. In Singapore and the Republic of Korea, it only takes ten days on average to obtain a temporary work permit. In Honduras, the same process can take up to 22 weeks. The global average to obtain a temporary work permit is eight weeks. The process is the fastest in the East Asia and the Pacific region where it takes five weeks. With 11 weeks, the processing time in the Middle East and North Africa region is the slowest.
Users also downloaded
Showing related downloaded files
No results found.