Development Paths and Employment

by DAVIES, R. and VAN SEVENTER, D., 2009
Research Report. Centre for Poverty Employment and Growth, Human Sciences Research Council

Intensive growth is defined as growth driven by productivity improvements. Productivity improvements are essential for rising incomes and poverty reduction, but can also have the effect of reducing employment ratios. Greater understanding of the role of productivity in development and growth is needed.Davies and van Seventer explore the meaning of intensive and extensive growth paths and considers how to construct an indicator that tracks whether the economy is tending toward one or the other. It suggests that such an index must be based on identifying dynamic sectors, in terms of their productivity growth and their linkages with the rest of the economy. A sector may be dynamic in itself, but this may not translate into the systemic dynamism required for economic development if spill overs into other sectors are not high. The paper illustrates how a monthly indicator of the development path can be constructed. An illustrative estimation suggests that the South African economy has been tending away from intensive growth since the end of 1995.