Jobless Development

Analyses of GDP per capita differences across countries focus almost exclusively on differences in productivity. We show that there are also large differences in medium-run dynamics in the employment-to-population ratio. We find a general tendency for productivity growth to be negatively correlated with changes in the employment to population ratio for a large sample of EMDEs. We coin the term jobless development to describe this phenomenon. We also show that there are large differences in the steady state levels of the employment to population ratios that countries are converging to. There are also countries that experience substantial increases in their employment-to-population ratio during the development process. We use a two-stage procedure to study this issue in a large sample of EMDEs. In the first stage, we estimate differences in steady-state employment ratios across countries. In the second stage, we document which institutional and policy factors are correlated with steady-state employment ratios. We find particularly large differences across countries in steady-state employment ratios for women. Fewer legal protections of women’s rights are associated with lower steady-state employment ratios for women, without an offsetting positive effect for men.