In the media
Brookings Institution blog discusses labor trends and growth in Mozambique - key findings of a recent WIDER Working Paper
A blog article by Christina Golubski published on Brookings' Africa in Focus blog series discusses the key findings and policy recommendations of a recent WIDER Working Paper Understanding Mozambique’s growth experience through an employment lens by Sam Jones and Finn Tarp.
The paper examines macro and microeconomic developments in Mozambique and applies labor market decomposition tools to investigate the disconnect between the country’s performance in growth and poverty reduction. The study is part of and as part of the project: ‘Understanding the African lions – growth traps and opportunities in six dominant African economies’.
The blog article highlights that although Mozambique experienced explosive growth between 1997-2015 with an average GDP growth rate of almost 8%, the growth has not transformed into substantially decreasing poverty rates. ‘While Mozambique’s poverty rates fell dramatically from 1997-2003, many experts attribute that trend to post-war recovery from the civil war that ended in 1992, no clear progress seems to have been made from 2003-09,’ Golubski writes.
A key finding explaining this controversial development is that, while labor movement out of agriculture—as in classic structural transformation—has contributed to aggregate economic growth, this trend is over-concentrated in the services sector, which itself is experiencing a decrease in labor productivity. The authors of the paper, Sam Jones and Finn Tarp, attribute the falling productivity in the services sector to the fact that ‘new workers in this sector tend to operate on an informal basis and undertake activities that are more precarious relative to existing workers'.
‘Aggregate productivity growth appears to be increasingly dependent on the services sector, which, due to low productivity growth, is not translating to substantial aggregate labor productivity benefits', Golubski summarizes the key finding of the study.
Finally, Golubski concludes the paper’s three policy recommendations for continued growth:
- Raise agricultural productivity through the creation of a clear and stable set of incentives for private buyers, which in turn would support domestic price stability.
- Invest in rural infrastructure—especially roads—in order to foster market linkages and encourage trade and specialization.
- Minimize distortions that act against export-oriented and labor-intensive activities, such as external price competitiveness (via the exchange rate) and Mozambique’s policy of different national minimum wages for different occupational sectors.
Read the blog post on Brookings website.
The ‘Understanding the African lions – growth traps and opportunities in six dominant African economies’ project is a collaboration among United Nations University-World Institute for Development Economics Research (UNU-WIDER), the University of Cape Town’s Development Policy Research Unit (DPRU), and the Brookings Africa Growth Initiative, that provides an analytical basis for policy recommendations and value-added guidance to domestic policymakers in the fast-growing economies of Africa, as well as for the broader global community interested in the development of the region.