Mauritius: Unemployment and the Role of Institutions
IMF Working Papers, November 1, 2003
Source details
- Canonical URL
- Mauritius: Unemployment and the Role of Institutions
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Bibliographic details
- Authors: James Y. Yao, Calvin A McDonald
- Published: November 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451874860.001
Overview
- Despite strong economic growth, a "U"-curve unemployment phenomenon in Mauritius is documented.
- Unemployment plunged from 21 percent to less than 4 percent between the early 1980s and the early 1990s, but this trend was reversed and the rate increased to 10 percent by end-2002.
- The paper provides an analytical framework to explain this development, attributing the pattern to sectoral skill composition and labor market rigidities.
Key findings and statistics
- Unemployment time path:
- 21 percent (early 1980s)
- less than 4 percent (early 1990s)
- 10 percent (by end-2002)
- Primary explanatory factors identified:
- Growth of higher-skilled sectors.
- Rigidities in the labor market that impede adjustment.
- Page length: 18 pages.
Analytical explanations (framework)
- The growth of higher-skilled sectors increased demand for skilled labor relative to unskilled labor.
- Skills mismatch between labor supply and demand contributed to rising unemployment when skill-intensive growth accelerated.
- Labor market rigidities, including institutional pay-setting mechanisms, limited the labor market’s ability to reallocate workers across sectors and skill levels, amplifying unemployment persistence.
Policy recommendations
- Invest in education to reduce skills mismatch and improve alignment of labor supply with the skill requirements of growing sectors.
- Reform pay-setting institutions to increase labor market flexibility and improve employment prospects.