Abstract
M.Com. (Development Economics)
This mini-dissertation aims to analyse the key factors driving the employment-output relationship in a subset of commodity exporting emerging market economies. Its contribution is to provide information about the ways in which an economy can create more employment growth for a given level of GDP, which is significant because GDP growth constraints are emerging in many parts of the world – particularly for commodity exporters.
The results show that movements in the terms of trade, exchange rate volatility, the share of investment in GDP and the share of general government spending in GDP are negatively correlated with a country’s employment-output elasticity. Meanwhile, better labour market policies and a higher share of services in GDP are positively correlated with the employment-output elasticity. There are two core policy proposals emanating from this study. Firstly, governments in commodity exporting emerging market economies should exercise fiscal restraint (particularly in times of high commodity prices). Secondly, as the economy moves up the value chain and accumulates larger quantities of capital, actions must be taken to shield citizens from the adverse effects of labour saving technological change and the incentives for some firms to substitute capital for labour in the production process. This requires a flexible labour market and an education system that provides an appropriate level of training to the workforce.