UNDERSTANDING MOZAMBIQUE’S GROWTH THROUGH AN EMPLOYMENT LENS

SAM JONES (UNI. OF COPENHAGEN)FINN TARP (UNU-WIDER & UNI. OF COPENHAGEN)

MOTIVATION• Mozambique one of the top regional growth

performers since mid-1990s• Successful transition from post-conflict

reconstruction to emerging market frontier• BUT pace of poverty reduction has been weak• On-going concern = absence of growth-enhancing

structural transformation• Mozambique not unique in this respect (Rodrik &

MacMillan, 2012; de Vries et al., 2013)

• New challenges emerging: natural resources

OUTLINE• Macroeconomic success• Microeconomic concerns• Labour market analysis

• Data• Methods• Trends• Findings

• Policy implications

MACROECONOMIC SUCCESS

-20

-10

010

20G

row

th

010

020

030

040

0Le

vel

1980 1990 2000 2013Year

US$ per capita Real p.c. growth rate (%)

MACROECONOMIC SUCCESS90-94 95-99 00-04 05-09 10-13 Change

GDP per capita, PPP (constant 2011 int. $) 458.3 524.4 662.1 832.7 1000.0 541.7

Inflation, consumer prices (annual %) 46.2 22.9 12.9 8.4 7.5 -38.7

Foreign direct investment, net inflows (% of GDP) 1.1 3.9 5.9 4.5 30.1 29.0

Exports of goods and services (% of GDP) 11.7 13.8 25.4 31.8 29.6 17.9

Imports of goods and services (% of GDP) 42.0 30.7 42.7 41.7 40.4 -1.6

Government consumption expenditure (% of GDP) 11.9 7.5 9.7 14.8 19.5 7.7

Net ODA received (% of GNI) 57.7 30.1 29.9 21.1 16.2 -41.6

MICROECONOMIC QUESTIONS(a) DHS surveys Group 1997 2003 2011 1997-03 2003-11

No education Male 26.2 25.4 19.3 -0.1 -0.8Female 47.4 44.4 32.8 -0.5 -1.5

Infant mortality Boys 153 127 75 -4.3 -6.5Girls 142 120 67 -3.7 -6.6

Under 5 mortality Boys 225 181 113 -7.3 -8.5Girls 213 176 103 -6.2 -9.1

Total fertility rate - 5.2 5.5 5.9 0.1 0.1

(b) Budget surveys Group 1996/97 2002/03 2008/09 1997-03 2003-09Consumption poor - 69.4 54.1 54.7 -2.6 0.1Asset poor - 73.8 73.6 66.7 0.0 -1.2Asset & cons. poor - 54.0 42.6 40.1 -1.9 -0.4Neither (non-poor) - 11.8 14.8 19.0 0.5 0.7

Change p.a.

Change p.a.

AFROBAROMETER SURVEYSUrban Rural

2002 2008 2012 2002 2008 2012(a) Fairly or very good living conditions now (%)South 23.2 27.2 18.8 26.8 28.4 26.2Center 40.1 18.8 24.7 45.4 24.5 25.8North 35.1 23.2 29.9 51.7 35.3 24.7All 31.6 23.6 23.7 44.3 28.9 25.5(b) Better or much better living conditions now vs 12 months ago (%)South 32.3 40.1 47.0 15.3 43.2 36.7Center 38.3 39.9 28.8 47.0 42.3 30.9North 34.4 47.8 46.0 48.2 41.8 31.8All 34.8 42.1 41.4 42.0 42.3 32.2(c) Often or always without a cash income (%)South 25.5 28.0 33.3 66.7 53.0 55.4Center 23.6 27.4 36.8 53.4 35.7 48.7North 46.7 32.9 36.9 37.2 50.1 60.4All 30.3 29.1 35.4 49.5 43.5 54.1

LABOUR MARKET ANALYSIS• Labour market = primary mechanism linking household

welfare and macroeconomic trends

• Question:• To what extent has macroeconomic success been

accompanied by structural changes in use of labour through the economy?

• Data:• No regular comprehensive employment data in Moz.• Latest full household budget survey 2008/09• New survey just completed, we use preliminary numbers• = up to date insights

SECTORAL GDP TRENDS

39

29

50

38

3

11

48

38

4

11

47

37

5

12

46

32

5

13

49

31

5

16

48

32

5

16

47

32

5

17

45

31

6

18

45

30

6

17

46

31

6

16

47

31

7

15

47

31

7

14

48

31

8

13

48

30

8

13

49

30

8

12

50

28

9

12

51

27

9

12

52

27

9

12

51

02

04

06

08

01

00

Pe

rce

nt

of

rea

l G

DP

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20122013

2014

Ag ri c u l tu re Mi n i n gMa n u fa c tu ri n g Se rv i c e s

LABOUR MARKET TRENDS

83

23

12

82

23

13

82

24

13

81

24

13

80

25

13

80

25

13

79

26

13

79

25

14

79

25

15

79

24

15

79

23

16

79

23

17

79

23

17

77

23

19

76

13

20

74

13

21

73

14

23

72

04

24

02

04

06

08

01

00

Pe

rce

nt

of

em

plo

ym

en

t

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

Ag ri c u l tu re Mi n i n gMa n u fa c tu ri n g Se rv i c e s

RELATIVE LABOUR PRODUCTIVITY TRENDS

- 0. 8

0. 4

1. 4

1. 4

- 0. 8

0. 8

1. 2

1. 3

- 0. 8

1. 0

1. 1

1. 3

- 0. 9

1. 0

1. 1

1. 3

- 0. 9

0. 9

1. 2

1. 3

- 0. 9

1. 0

1. 1

1. 3

- 0. 9

1. 0

1. 1

1. 2

- 0. 9

1. 1

1. 3

1. 2

- 1. 0

1. 1

1. 3

1. 2

- 0. 9

1. 2

1. 4

1. 1

- 0. 9

1. 3

1. 5

1. 1

- 0. 9

1. 4

1. 5

1. 1

- 0. 9

1. 4

1. 6

1. 0

- 0. 9

1. 6

1. 5

1. 0

- 0. 9

1. 9

1. 4

0. 9

- 1. 0

2. 2

1. 3

0. 9

- 1. 0

2. 5

1. 2

0. 8

- 1. 0

2. 9

1. 2

0. 8

-10

12

34

Lo

g.

rati

o

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

Ag ri c u l tu re Mi n i n gMa n u fa c tu ri n g Se rv i c e s

SECTORAL DYNAMICS

Agr icult ur e '97- 05Agr icult ur e '06- 14

M ining '97- 05

M ining '06- 14

M anuf act ur ing '97- 05

M anuf act ur ing '06- 14Ser vices '97- 05

Ser vices '06- 14

-10

00

10

02

00

La

bo

ur

pro

du

cti

vit

y v

s m

ea

n (

log

.)

-1 0 -5 0 5 1 0Ch a n g e i n l a b o u r s h a re (% )

METHODS• Standard decomposition of changes in labour productivity

into three main sources:

1. Intra-effect: changes in productivity within-sectors, holding labour composition fixed.

2. Denison effect: reallocation of labour across sectors, holding productivity fixed.

3. Baumol effect: dynamic structural reallocation effect, equal to the interaction between productivity growth and relative labour growth.

2 + 3 = contribution due to structural transformation

STRUCTRUAL CHANGE?Intra SRE DYE Total Intra SRE DYE Total

1997-'02 Agriculture 1.40 -0.29 -0.01 1.10 22.2 -4.5 -0.2 17.5Manufacturing 0.06 1.94 -0.01 2.00 1.0 30.8 -0.2 31.6Mining 0.67 0.06 0.01 0.73 10.5 0.9 0.2 11.6Services 2.15 0.32 0.01 2.48 34.0 5.1 0.2 39.3Total 4.28 2.04 0.00 6.32 67.7 32.2 0.0 100.0

2003-'08 Agriculture 1.15 -0.08 0.00 1.06 27.6 -2.0 -0.1 25.5Manufacturing 2.04 -1.44 -0.21 0.39 48.9 -34.5 -5.0 9.5Mining 0.66 -0.07 -0.01 0.58 15.8 -1.7 -0.2 13.8Services 0.19 1.94 0.00 2.13 4.5 46.6 0.1 51.2Total 4.04 0.35 -0.22 4.17 96.8 8.4 -5.2 100.0

2009-'14 Agriculture 1.02 -0.44 -0.02 0.56 24.2 -10.5 -0.4 13.3Manufacturing -0.20 0.49 -0.08 0.20 -4.8 11.6 -1.9 4.8Mining 2.97 -1.57 -0.69 0.71 70.5 -37.3 -16.4 16.8Services -0.39 3.16 -0.03 2.74 -9.2 75.0 -0.7 65.1Total 3.40 1.64 -0.82 4.21 80.6 38.9 -19.5 100.0

Absolute Relative

FINDINGS• The majority of Mozambique’s labour force remains

dependent on low productivity agriculture• Inter-sectoral labour movement has been small, and

dominated by growth of services sector• Inter-sectoral differences in labour productivity are

widening, esp. with investment in mining sector• Productivity growth driven by:

• Within-sector growth, BUT this is slowing• Movement of workers from agriculture to services BUT

average productivity in services is falling• Negative dynamic reallocation effect most recently (!)

• Contribution of structural change is low and falling

POLICY CHALLENGE5

10

15

20

25

2010 2020 2030 2040 2050Year

Wi th primary Wi thout primary

Tota l work ing-age popu la tion

24

68

10

2010 2020 2030 2040 2050Year

Males Females

Work ing-age pop. wi th primary edu., (by gender)

POLICY CHALLENGE4

56

78

2010 2020 2030 2040 2050Year

Forecast at median

Years of schooling / worker (aggregate)

24

68

10

2010 2020 2030 2040 2050Year

Males Females

Years of schooling / worker (by gender)

POLICY IMPLICATIONS• Primary concern: Mozambique’s current growth mode

(dynamic) is capital intensive and NOT pro-poor• Major demographic challenges on the horizon• What can be done?• Relevant distinction:

• Microeconomic sector- / firm-specific policies• Macroeconomic initatives (affect multiple sectors)

• Broad-based, macroeconomic approaches are preferred

• Weak policy implementation capacity

• Scale of the challenge

• Fertility rate is not falling

SUGGESTIONS1. Raise rural sector productivity

• Establish clear and stable incentives for private sector agents to engage with rural producers

• Rural infrastructure

2. Address anti-labour policy distortions

• Over-valued real exchange rate

• Minimum wage policies

MINIMUM WAGES

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010

2030

Gro

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050

100

150

Leve

l (U

SD

)

1996 2000 2005 2010 2014Year

Real US$ per capita Growth rate (%)

CONCLUSION• Mozambique IS a success story• BUT new challenges emerge in each development phase• Current challenge is to ensure growth is sustained and yields

genuine welfare improvements across society• This concern is urgent:

• Structural transformation weak and slowing• Current mode of growth is dependent on capital intensive

mega-projects and shift of some labour from low productivity agriculture to only slightly higher productivity services, which is becoming saturated

• Demographic challenges on horizon

• No ‘magic bullet’ policy solutions• Address rural productivty and anti-labour policy distortions