Empirical Analysis of Employment Elasticity of Growth in Botswana

Abstract

Botswana experienced increased economic output growth and performance in the past decades due to the discovery of diamonds along with its major contribution to Gross Domestic Product (GDP), as well as improved per capita GDP. However, growth which does not result into employment, but rather with increased levels of unemployment coupled with poverty, is a concern in this country. This study therefore examined the employment elasticity of growth for Botswana using data over the period 1980 to 2011. The error correction mechanism (ECM), which is the short-run dynamic of the effect of changes in total and sectoral GDP on employment, gives the speed of adjustment to equilibrium given a shock in the long-run equation. The employment elasticity of growth of total GDP was found to be negatively related to employment growth, but the sectoral employment elasticity of growth was positive and quite low. Based on the results obtained, this paper thus recommended policies that encourage labour-intensive job creation rather than labour-replacing job creation, as well as employment subsidy, especially in the major sectors considered.

DOI: 10.5901/mjss.2014.v5n2p171