November 2013

IZA DP No. 7717: Is there a Trade-off between Employment and Productivity?

published as 'Macroeconomic and Sectoral Issues in Youth Employment Policy' in: O'Higgins, N., Ebell, M.; Junankar, P.N. (eds.), Rising to the Youth Employment Policy, Geneva, 2017, Ch.2

The aim of this paper is to analyse the possible trade-off between employment and productivity using panel data on world economies, developed and developing. We begin with the importance of productivity growth for developing countries, followed by a brief discussion of the concept of productivity and how it is measured. We discuss the concept of "decent work" and provide an index to measure decent work, and study its changes over time. First we provide some simple descriptive statistics and then carry out an econometric investigation using alternative estimation techniques. Our broad results suggest that there is a trade-off between employment and productivity.