The Role of Sectoral Growth Patterns in Labor Market Development

56 Pages Posted: 20 Apr 2016

Date Written: October 1, 2012

Abstract

This paper investigates the relationship between sectoral growth patterns and employment outcomes. A broad cross-country analysis reveals that in middle-income countries, employment responds more to growth in less productive and more labor-intensive sectors. Employment in middle-income countries is susceptible to a resource curse, and grows rapidly in response to manufacturing and export manufacturing growth. Within Brazil, Indonesia, and Mexico, the effects of different sectoral growth patterns are context dependent, but differences in sectoral growth effects on employment and wages are substantially reduced in states or provinces with higher measured labor mobility. Consistent with this, aggregate employment and wage effects of growth by sector are close to uniform when examined over longer time horizons, after labor has an opportunity to adjust across sectors. The results reinforce the importance of growth in more labor-intensive sectors, and suggest that job mobility may be an important mechanism to diffuse the benefits of capital-intensive growth.

Keywords: Labor Policies, Labor Markets, Economic Theory & Research, Achieving Shared Growth, Banks & Banking Reform

Suggested Citation

Arias-Vazquez, Francisco Javier and Lee, Jean and Newhouse, David Locke, The Role of Sectoral Growth Patterns in Labor Market Development (October 1, 2012). World Bank Policy Research Working Paper No. 6250, Available at SSRN: https://ssrn.com/abstract=2166683

Francisco Javier Arias-Vazquez (Contact Author)

affiliation not provided to SSRN

No Address Available

Jean Lee

World Bank

1818 H Street, NW
Washington, DC 20433
United States

David Locke Newhouse

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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