Employment and Income Distribution Experiences of Minerals Exporters and of Countries Achieving Growth Acceleration: Executive Summary

by BERRY, A. , 2006
Research Report, Employment Growth & Development Initiative, Human Sciences Research Council

Many but not all minerals-dependent countries have performed badly in spite of the apparent advantage such an endowment gives them. Various institutional weaknesses have been identified in cross-country analyses as contributors to this outcome. Indonesia and Chile have been able to avoid such negative impacts on growth. Indonesia, which invested much oil revenue in smallholder agriculture and later used devaluation and other instruments to become an important exporter of light manufactures, was also able to achieve good employment growth and maintain reasonable equality An analysis of countries which have achieved significant growth acceleration highlights the fact that they have all raised their investment rates, usually by a large amount, and their savings rates as well. The marginal output/capital ratio usually rises significantly during the take-off. Most accelerations are based on or helped by export booms, and a competitive exchange rate is the near universal instrument involved. Reasonable fiscal balance is desirable to achieve macroeconomic stability, although the rate of inflation has not systematically been low around the time of acceleration. Take-offs tend to increase employment, with wage increases usually following after a few years’ lag. Inequality typically does not rise, with the rapid employment creation likely the main reason. Most countries achieving successful accelerations have employed some sort of coherent industrial strategy.