1 Does Employment Generation Really Matter for Poverty Reduction ?

In this paper we analyze whether the employment/productivity profile of growth as well as its sectoral pattern matter for poverty reduction. We also identify some conditions of the labor market which are associated with employment intensive growth or specific sectoral growth. We find that, in the short run, while the overall employment intensity of growth does not matter for poverty reduction, the sectoral pattern of employment growth and productivity growth is important. While employment intensive growth in the secondary sector appears to be associated with decreases in poverty, employment intensive growth in agriculture increases poverty. Similarly productivity intensive growth in agriculture is associated with poverty reduction. The results suggest that focusing on the aggregate employment elasticity of growth, alone, as a way to reduce poverty may lead to misleading policy recommendations and more be gained by focusing on secondary sector employment growth and productivity intensive growth in agriculture. 1 Poverty Reduction Group, World Bank