Macroeconomic policies and sustainable employment yields in sub‐Saharan Africa

The impact of macroeconomic policies on employment yields from output growth in sub‐Saharan African countries is examined in this study. Data for 37 countries are used for the period 1991–2016 and sustainable employment yields are obtained by comparing employment elasticities for own‐account (vulnerable) and employers (formal) groups. The two‐stage least squares method is used to estimate employment elasticities for the panel datasets for three sub‐periods (1991–1999, 2000–2009, 2010–2016), and the feasible generalised least squares method is used to estimate the effects of policies on employment elasticities based on a pooled dataset for the three sub‐periods. Policy efforts are shown to be more effective if moved towards more flexible and targeted tax regimes, more rigid labour markets, and liberalised trade. On the other hand, investment and industrial policies do not appear to exert unidirectional effects on employment, especially given wide variations in government sizes and relative shares of domestic/foreign investment among the countries. There is also evidence that policy influences are more practicable with more formal employment groups. Patterns of macroeconomic policy directions are therefore critical to their effectiveness as labour market adjustment tools in the region.