Employment effects of DEG`s investment
Transcription
Employment effects of DEG`s investment
Employment effects of DEG’s investment - the Löwenstein theory Washington, January 29th Christiane Rudolph Director Corporate Strategy and Development Policy Results chain for employment effects Effects beyond what we can directly count Direct employment effects Construction / Implementation Operations Construction firm/service provider carries out project Operations / Maintenance Construction firm/service provider employs staff Operating company employs staff Indirect effects Value Chain upstream downstream Construction firm/ operator requires input Beneficiaries increase local output Supplying and buying firms employ staff / Increased opportunities for self-employed people (e.g. farmers) Induced employment effects Business Climate and Productivity New business opportunities Production costs New firms emerge Labor productivity Existing firms increase productivity Local demand Laborers earn income Increased local demand New and existing companies employ staff Graph based on Estimating induced employment effects using Cobb-Douglas function / Washington / January 29th 2 Selecting a method to estimate induced employment effects Neoclassical growth theory: Cobb-Douglas production function We are searching for the change in employment brought about by a typical DEG financed investment project in the formal sector of an economy. There are several options to approximate a project’s contribution to employment at the national level, e.g. - rely on input-output tables - use computable general equilibrium models - base calculations on models of economic growth Study by DEG aimed to derive a project’s contribution to employment at the national level from neoclassical growth theory. The aggregate production function that underlies formal sector production is of Cobb-Douglas type: Y = GDP A = Technology level K = Capital Stock L = Employment Assumptions: - technology level (A) remains constant - absence of full employment (challenging neo-classical assumptions) - constant economies of scale and constant partial production elasticities of capital and labour Estimating induced employment effects using Cobb-Douglas function / Washington / January 29th 3 Calculating the induced employment effect The employment effect is measured by comparing employment in reality (index r) (with the DEG investment) with the counterfactual employment (index c) (without the DEG investment). In order to calculate ΔLf we need to know about the effect of the DEG investment on formal sector capital stock growth. The model assumes that ΔgLf = ΔgKf. For the calculation of the capital coefficient kf we make use of the properties of the underlying aggregate production function (for the steps to get to this point, see report) Data on I, Y, gY and gL is provided by the World Bank (WDI). Research on partial production elasticity shows that most estimated labor shares lie between 0.6 and 0.8 (avg. 0.65). The presented model took a conservative approach and assumed that a = 1/3. With that information, we can calculate ΔLf . Estimating induced employment effects using Cobb-Douglas function / Washington / January 29th 4 Applying the model to DEG’s projects Issues to keep in mind when applying the model: - Ideally the model is used after total reimbursement of the project (ex-post). In that case, actual data on Y, K and L development during the project’s lifetime is available. - The model should only be used for greenfield and expansion projects. Unfortunately model is not sector-specific as this data is not readily available. - Calculations are based on the total investment costs of a project, not the contribution of DEG (only the project as a whole contributes to employment). Within DEG, due to some data issues, we are not yet able to calculate ex-post. Instead, we used data from 2000-2010 to make estimations for the commitments in 2012. - A spreadsheet was built to calculate the change in employment (ΔLf) brought about by a USD 10.000 investment for approximately 100 countries (depending on data availability). - For each country, DEG aggregated the total investment volumes of the projects DEG participated in. - Multiply both indicators Estimating induced employment effects using Cobb-Douglas function / Washington / January 29th 5 Employment effects for infrastructure commitments 2012 DEG highly underestimates employment effects Aggregated total investment volume in USD Total dL per USD 10.000 Induced employment from model Total employment in the GPR COTE D'IVOIRE 398.520.000 0,25 10.051 57 GHANA 394.800.000 6,75 266.562 10 1.134.755.963 1,73 195.752 6.920 INDONESIA 174.318.206 0,74 12.962 180 MEXICO 47.400.000 0,03 158 428 NAMIBIA 15.360.000 0,19 296 124 NICARAGUA 103.320.000 n/a PERU 747.480.000 0,50 37.133 25 SRI LANKA 25.320.000 1,27 3.212 50 SOUTH AFRICA 853.560.000 0,13 11.390 119 URUGUAY 306.000.000 0,16 4.806 25 4.200.834.169 - 542.322 7.938 Country INDIA SUM Estimating induced employment effects using Cobb-Douglas function / Washington / January 29th 6 Thank you for your attention! Department for Corporate Strategy and Development Policy Chrsitiane Rudolph DIrector DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH Kämmergasse 22 50676 Cologne Phone Fax +49 221 4986 – 1530 +49 221 4986 - 1292 [email protected] Estimating induced employment effects using Cobb-Douglas function / Washington / January 29th 7 Country ranking for “total dL per USD 10.000” Based on data from 2000-2010 Country Malawi Congo Uganda Cambodia Tanzania Tajikistan Nepal Lao PDR Ghana Chad Afghanistan Gambia, The Niger Eritrea Bangladesh Moldova CAR Georgia Benin Vietnam Madagascar Total dL per Country USD 10.000 21,37 14,64 12,78 11,54 10,18 9,64 8,03 7,43 6,75 6,53 5,61 5,34 5,06 4,97 4,65 4,23 3,79 3,69 3,49 3,27 2,87 Kenya Zambia Guyana Mali Senegal Togo India Guinea Uzbekistan Honduras Sri Lanka Sudan Lesotho China El Salvador Philippines Liberia Mauritania Djibouti Mongolia Pakistan Total dL per Country USD 10.000 2,70 2,63 2,51 2,23 2,21 1,92 1,73 1,72 1,66 1,37 1,27 1,23 1,18 1,13 1,10 1,05 1,05 1,05 1,04 1,01 1,00 Bhutan Azerbaijan Jordan Macedonia Turkmenistan Ukraine Angola Bolivia Indonesia Dom. Rep. Cuba Vanuatu Belarus Cameroon Guatemala Bulgaria Peru Timor-Leste Paraguay Egypt, Romania Total dL per Country USD 10.000 0,98 0,97 0,93 0,91 0,89 0,86 0,78 0,77 0,74 0,73 0,71 0,70 0,67 0,65 0,57 0,50 0,50 0,49 0,49 0,49 0,47 Papua New Guinea West Bank and Gaza Kazakhstan St. Vincent Thailand Morocco Ecuador Yemen, Rep. Lithuania Bosnia and Herz. Syria Colombia Maldives Cote d'Ivoire Congo, Rep. Belize Mauritius Latvia Russia Panama Jamaica Estimating induced employment effects using Cobb-Douglas function / Washington / January 29th Total dL per Country USD 10.000 0,44 0,44 0,43 0,43 0,41 0,39 0,39 0,37 0,31 0,30 0,30 0,28 0,27 0,25 0,25 0,24 0,23 0,23 0,22 0,22 0,22 Brazil Swaziland Tunisia Namibia Costa Rica Uruguay Botswana Argentina South Africa Turkey Malaysia Iran Tonga St. Lucia Venezuela Chile Algeria Mexico Libya Total dL per USD 10.000 0,21 0,20 0,20 0,19 0,16 0,16 0,14 0,14 0,13 0,13 0,10 0,10 0,09 0,08 0,06 0,06 0,04 0,03 0,03 8