Hitching employment to a growth strategy: services bulge and productivity growth

Abstract

An employment-oriented growth strategy requires a strategy of public investment in agriculture and promoting new technology, including the inputs embodied in those technologies. The bulge of employment in services is attributed to low productivity in the sector rather than to a high income elasticity of demand for its output. The paper argues for policy to concentrate on transforming manufactured goods clusters by exploiting their capacity to be sources of knowledge spillovers. Finally, with fiscal policy oriented towards long-term issues, aggregate demand management becomes the domain of monetary policy and the paper argues in favour of an expansionary outlook.