Growth: An Essential Part of a Cure for Unemployment

IMF Blog, November 19, 2014

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Nearly 200 million people around the world are looking for work.
Half of the unemployed are in emerging markets and about a quarter in advanced economies.
The paper examines whether stronger output growth reduces unemployment across country groups, using a sample of about 80 countries (including the G20).

Advanced economies (average): unemployment falls by a third of a percentage point for each additional percentage point of real GDP growth.
Emerging market economies (average): an additional percentage point of output growth lowers the unemployment rate by ¼ of a percentage point.
Employment growth response (right panel of Figure 2):
- Impact of output growth on employment growth is stronger in advanced and emerging economies than in frontier and other developing economies.
- Emerging markets (average): a percentage point of output growth raises employment growth by 0.2 percentage points.
G20 historical links between growth and jobs (Figure 3):
- Range across most G20 members from 0.6 in the United States to about 0.2 in Russia.
Broad conclusion:
- The relationship between growth and jobs holds well in a number of emerging economies; in frontier and other developing economies the relationship is much weaker.
- Growth is not a panacea, but it is an essential part of the cure for unemployment.

Complementarity of demand and supply policies:
- Continued support to domestic demand is necessary so that firms see improved sales prospects and expand capacity.
- Adoption of policies and reforms that can boost supply is required to make growth durable; supply measures alone may have little short-run impact without demand support.
Advanced economies:
- Monetary policy should continue to support the recovery in demand.
- Fiscal adjustment should be attuned in pace and composition to country needs and be as growth-friendly as possible.
Emerging markets:
- Need to address underlying structural problems, which vary across countries (examples include removing bottlenecks in the power sector and reforms on labor and product markets).
Infrastructure:
- In many countries, increasing public infrastructure investment is justified:
- Provides a boost to demand in the short term.
- Helps supply (potential output) over the longer term.

Growth can help job creation, but the extent varies across emerging markets and across advanced economies.
While growth alone will not solve all unemployment problems, it is an essential component of policy strategies to reduce unemployment.

Source: Growth: An Essential Part of a Cure for Unemployment — Davide Furceri, Prakash Loungani (November 19, 2014).

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- 经济增长对解决失业问题发挥重要作用; iMFdirect博客; 2014年11月19日 (Markdown version)
- 经济增长对解决失业问题发挥重要作用; iMFdirect博客; 2014年11月19日 (PDF)
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- 成長：失業率改善策の不可欠な要素; ダビデ・ヒューセリ、プラカシュ・ラウンガニ, iMFdirect ブログ, 2014年11月19日掲載 (PDF)
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- Экономический рост — важный ингредиент лекарства от безработицы (Markdown version)
- Экономический рост — важный ингредиент лекарства от безработицы (PDF)