Development And Enterprises’ Labor Demand In Sub-Saharan Africa: Evidence From Panel Data Of Four Countries

Even though Sub-Saharan African countries have implemented various policies to reduce unemployment, the contribution of these policies to employment growth has been less than satisfactory. The objective of this study is to broaden the literature and gain a better understanding of labor markets in Ethiopia and other Sub-Saharan African countries by providing an updated view of labor markets and testing hypotheses about enterprise-level decisions to use labor. Both the rate of employees and the average wage mainly depend on the evolution of production per capita. In section 2 we present a comparison of production per capita in Ethiopia for the period 1995-2019 in comparison with other African countries, concluding that there was a positive advancement and that it is possible to foster industrial production and development. The study also adds to the limited literature on labor demand determinants at the enterprise level, and also adds new dimensions to African employment literature by describing the role of consistent incentives and efforts in ensuring rapid and sustainable employment growth, which are missing in the context of sample countries. Pooled panel random effects General Least Squares (GLS) regression model is used to identify the determinants in businesses. According to the study, the ownership type of enterprise, output, weekly hours worked, and export status all increase labor demand positively and significantly in all study countries. To reduce unemployment, governments should encourage the formation of corporations, incentivize enterprises to work at their full capacity, capitalize on regional integration, and take advantage of regional integration, and the current African Growth Opportunity Acts (AGOA), which provide duty-free trade access to African countries in order to increase export volumes.