Dynamic and Follower Sectors

by ALTMAN, M & NGANDU, S, 2008
Research Report, Employment Growth & Development Initiative, Human Sciences Research Council

Altman and Ngandu consider the role of different kinds of sectors’ contribution to growth and employment. Historically, goods production and exports have been a central focus of employment strategies. However, a growing majority of employment created globally is found in services, which are often considered to be non-traded sectors. This raises concerns for policy that has twin aims of employment creation and economic growth. All high growth economies can attribute some significant part of their success to penetrating global markets. It is very probable that a large proportion of jobs will be created in non-tradables in future, no matter what path a country follows. However, the greater the proportion of new employment created in more dynamic traded sectors, the more benefit there will be to working people. This is because there is more potential for market expansion, productivity growth and real wage growth. Given the services sector role in job creation, more attention needs to be devoted to understanding how they can stimulate dynamic economic growth. Altman and Ngandu find that services could be a drag on growth, unless the business and policy environment encourages them to become more dynamic. This could have a second benefit, which is to generate more activity in traded sectors that are able to stimulate both growth and employment.