World of Work Report 2013 - International Labour Organization

Market) database (ILO, 2011) and real GDP data from the World Economic Outlook
database of the IMF (IMF, 2013a). GDP fi gures are expressed in constant
local currency units.
Employment–output elasticities are estimated following the methodology
developed by Escudero (2009) for three groups of countries: advanced, emerging
and developing economies. The following equation was estimated independently
for each of these three country groups:
ln e it = α + β it lny it + ε it
where (e it ) corresponds to the level of employment at time t and y it is the real GDP
at time t.
The results of the analysis are presented in table 1B.1. The model was estimated
using a random-effect GLS estimator following the results in favour of this
estimator by the Hausman test. GLS estimation presented an additional advantage
since it allowed the estimations to be corrected for groupwise heteroskedasticity
– tested through the modified Wald test. As can be seen in table 1B.1,
all coefficients remain highly significant after the tests have been carried out.
Moreover, regressions have been rerun using different estimation methods and
robustness tests with little change in the absolute sizes of the estimated coeffi -
cients, giving some confidence in the estimated outcomes.
The estimated employment–output elasticities are consistent with the empirical
evidence. On average, the relationship between employment and output
is weaker in emerging and developing economies than in advanced economies.
Indeed, evidence suggests that the employment elasticity is negatively correlated
with structural features of the economy, such as informality and the degree of
product market flexibility (IMF, 2012), which weakens the employment–output
relationship in emerging and developing countries.
Table 1B.1 Regression results
ln of employment
Advanced economies Emerging economies Developing economies
ln of real GDP 0.5526*** 0.3329*** 0.2783***
(0.008) (0.021) (0.008)
Constant 4.89*** 6.55*** 6.67***
(0.043) (0.099) (0.030)
Observations 360 202 150
Number of countries 43 32 25
Number of crisis episodes 92 54 47
Notes: Standard errors are in parentheses. Significance levels: ** at 5per cent; *** at 1per cent.
For details of the countries included in each group see Appendix A.
1983–86, 2008–11; Tunisia 1997–2000, 2010–11; Turkey 1982–85, 2000–03, 2008–11; Uruguay
1981–84, 2002–05; Bolivarian Republic of Venezuela 1994–97, 2008–11.
Developing economies: Armenia 1994–96, 2008–11; Belize 2008–11; Bolivia 1986–89, 1994–97;
Egypt 1980–83; El Salvador 1989–92, 2008–11; Georgia 2008–11; Guyana 2002–05; Honduras
1981–84, 1993–96, 1998–2001, 2008–11; India 1993–96; Indonesia 1997–2000; Kyrgyz Republic
1995–98, 2001–05, 2006–10; Republic of Moldova 1993–96, 1997–2000, 2008–11; Mongolia 2008;
Morocco 1991–93, 1994–97; Nicaragua 1990–93, 2000–03, 2008–11; Paraguay 1998–2001, 2008–
11; Philippines 1983–86, 1990–93, 1997–2000; Samoa 1980–83, 1990, 1998–2000; São Tomé and
Príncipe 1991–93; Syrian Arab Republic 1983–84, 1997–99, 2002–05; Tajikistan 1993–96; Uganda
1994–97; Ukraine 1993–96, 1998–2001, 2008–11; Uzbekistan 1993–96; Viet Nam 1997–2000.
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1. Overview of employment trends and projections