Employment creation in less developed countries: A cross section analysis

U. Hiemenz and Klaus-Werner Schatz

No 38, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Research in the field of economic development and respective discussions in the political sphere are presently focussing on two major issues: the social inequality within the third world and the continuously widening, economic gap between developing (LDCs) and developed (DCs) nations. The remedy for both problems suggested by UNIDO, the UN General Assembly and various other institutions is a new international economic order''. One aspect of this new order is the claim for a 20 per cent share of LDCs in total manufacturing production of the world by the year 2000. Given a 6.8 per cent share of LDCs manufacturing output at present (in 1973) a tremendous structural change will have to take place in third world economies and in the international division of labour in order to achieve the 20 per cent target. The purpose of this paper is to analyse the past structural change in LDCs and to outline some of the implications of the intended increase of their share in world industry. In particular, the paper seeks tentative answers to such questions as - whether the necessary structural change is feasable and under which conditions it is likely to occur; - what the prospective employment effects of such a strategy would be and - whether alternative strategies might offer better chances in reducing unemployment and poverty within the third world. To fulfill this task in the first part of the paper, a cross section analysis is applied to a sample of LDCs and DCs respectively. The focus is to identify major determinants of sectoral patterns of production, employment and productivity in both country groups and to find out whether there are differences among the various patterns or among country groups. Based on these estimates some projections of production and employment patterns are made in the final section of the paper and some consideration is given to the potential contribution to employment creation in various economic activities.

Date: 1975
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