Rwanda

1
Rwanda

• A Country in Economic Transition
• (with emphasis on 2000 to 2006)

March 16, 2008 World Bank/CSAE Workshop Shared
Growth and Job Creation in Africa Engines and
Barriers
2
Population and GDP GrowthSource WDI (pop),
MINECOFIN (GDP)
This analysis will focus on 2000 to 2006 period
3
Basic Trends, 2000-2006 Source MINECOFIN (GDP),
eicv1 eicv2 (Employment and Population)
94 2001 RWF 1 US (PPP)
4
Consumption Poverty 2000-2006

• The relatively small movement in the poverty
  headcount masks larger declines in the poverty
  gap, and severity.
• Extreme poverty headcount declines from 41.3 to
  36.9 i.e. by 10.6

5
Dramatic changes in labor market

• Lower employment-to-population level
• Increased non-agricultural employment
• Increased wage work
• Increased wage work within agriculture
• Higher share of workers with multiple jobs

6
Lower Employment-to-Population Ratio(15-64)

• 2000 84.7 2006 79.2
• The change is driven by a decline in 15-24
  year-old participation rates
• Accounts for nearly 75 of change

7
Lower Employment-to-Population Ratio

• Appears related to increased educational
  attainment, a good outcome!
• Increased enrollment rates, (similar across
  gender)
• Likely that increased education is driving lower
  participation and not vice versa (unemployment is
  near zero in Rwanda)
• May trade-off some GDP growth today for more
  productive workers tomorrow

8
Dramatic change in labor marketAg/Non-Ag

• Non-Agricultural jobs increased from 11.4 of
  primary jobs in 2000 to 23.7 in 2006.
• Relative decline in agriculture is occurring
  throughout the country

9
Changes in Value Added and Employment across
sectors
10
Changes in Value Added and Employment across
sectors
11
Decomposing change in GDP per capita

• Y/N (Y/E)(E/A)(A/N)
• GDP per capita can be decomposed into 3 parts
• Output per worker
• Employment to (Working Aged) Population Ratio
• Working Aged Population to Total Population
• Decomposition of the change in GDP uses Shapley
  approach to divide each component
• As with all such decompositions, this does not
  provide a direct causal interpretation.

12
Decomposing change in GDP per capita

• Lower participation is associated with a sizable
  decline in GDP per capita of 6,023 RWF
• 7.4 of GDP per cap in 2000 36 of the ? in GDP
  per capita
• Remember driven by 15 to 24 year-olds

13
Decomposing change in GDP per capita due to
employment changes

• Note Values represent the contribution to the
  change in GDP per capita
• Percentage values are in percent of total change
  in GDP per capita

14
Decomposing change in GDP per capita

• Notice the increase in output per worker. This
  drives growth in GDP per capita.
• 25 of GDP per cap in 2000 122 of the ? in GDP
  per capita

15
Decomposing change in GDP per capita due to
changes in output per worker

• Note Values represent the contribution to the
  change in GDP per capita
• Percentage values are in percent of
  total change in GDP per capita

16
Inter-sectoral changes and growth

• The contribution of inter-sectoral changes
  account for 230 of the change in GDP per capita
• Given the average output per worker of each
  sector, the inter-sectoral shifts have accounted
  for an increase of roughly 90,000 RWF in output
  per worker and 39,000 RWF in GDP per capita.
• In comparison, the TOTAL output per worker in
  2000 was
• approximately 185,000 RWF and the TOTAL GDP per
  capita in 2000 was approximately 81,000.
• After accounting for both employment and output
  per worker changes in each sector, the total
  contribution of each sector is negative.

17
Inter-sectoral changes and growth

• Output per worker declines in secondary and
  tertiary sectors
• Possibly the new influx of workers are moving
  into less productive areas (to examine both
  cohorts of individuals and change in industry
  sub-sector concentration to try to identify these
  new jobs and an idea of their earnings levels,
  etc.)
• Output per worker increases in agriculture
• To explore further- Two hypotheses
• Increased wage work is on different type of crop
  (for export)
• Increased output per worker with same crop
• As people flow out of agriculture, Lewis model or
  any production function with decrease in labor
  for a fixed capital asset (land) would suggest an
  increased output per worker.
• May be both or a combination

18
Output per worker/Earnings by sector

• Percent change in median real earnings across
  sectors agrees with previous results
• Macro data uses GDP/value added by sector from
  National Accounts and employment by sector from
  eicv1, eicv2 Median earnings comes strictly from
  eicv1 eicv2 (LSMS type household survey data).

19
Increase in wage work and multiple jobs

• Towards wage work
• 2000 11.2 2006 22.9
• Increase in share of workers with multiple jobs
• From 16 to 39
• Will assess if these are agricultural jobs for
  new non-agricultural workers

20
Dramatic change in labor marketIncreased wage
work in Agriculture

• Near tripling of agricultural wage employment
• Occurring throughout country
• Decrease in non-wage agri employment is large, at
  least as share of total employment

21
Conclusions so far

• Depth and severity measures of poverty show
  greater poverty reduction than the headcount
  measure
• Poverty reduction was disappointing, given
  growth, when using the headcount measure
• Other measures also suggest improvement in recent
  years.
• The labor market has shifted dramatically towards
  non-agricultural work
• This is associated with large gains in GDP per
  capita over the 2000 to 2006 period
• Gains may continue in the long run (particularly
  if this is the result of new entry by relatively
  high-skilled young entrants) but will require a
  proper climate to foster growth in the non-ag
  sector

22
Conclusions so far

• Agricultural employment has become increasingly
  wage oriented
• Short run implications require more analysis
• Initial results are somewhat mixed when comparing
  changes in earnings vs changes in household
  expenditures for such workers
• More needs to be done to understand this change
  within the context of household allocation of
  labor

23
Next Steps

• More with earnings data
• Segmentation, etc.
• What type of non-agricultural work are people
  doing? Can we identify the newcomers?
• What are the agricultural wage workers producing?
• Who is hiring?
• Second Jobs
• Diversification of Income
• Education Skills
• Return Migrants
• Food Prices