Manufacturing Technology Intensity, Employment, Wages and Capital Formation in Africa

Given the potential for inclusive growth in manufacturing, this paper examines the effect of manufacturing sub-sectors, categorised by technology intensity, on employment, wages, gross fixed capital formation and female manufacturing employment in African countries for the period 1980 to 2019. It differentiates manufacturing sub-sectors by their technology intensity following the International Standard Industrial Classification (ISIC) revision 3, and the technological classification adopted by UNIDO, categorised into low, medium-low, medium-high and high technology, and consists of 10, five and eight technological groups respectively. We employed cross-sectional panel estimations and found a decline in manufacturing employment as output increased. The decline increased between 1985 and 2015 and, more significantly, in the low technology-intensity manufacturing sub-sector, with the medium-tech sub-sectors becoming the main drivers of employment in manufacturing. There was a sharp decline in female employment in manufacturing as output increased, largely attributed to low-tech manufacturing sub-sectors. However, medium- and high-tech sub-sectors are better able to retain female labour as manufacturing output increases. Similar to the pattern in employment, there was a sharp decline in wages as manufacturing output increased, due primarily to a fall in wages in low-tech sub-sectors. In contrast, wages increased at an increasing rate with medium- and high-tech manufacturing output. We find that capital formation falls as manufacturing output increases, dominated by the fall in low tech manufacturing capital, with the rise in capital largely driven by medium- and high-tech sub-sectors. These findings are relevant for policymakers for understanding which manufacturing sub-sectors better sustain employment, wages and capital formation, including female employment, in the drive for industrialisation in African countries.