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This dissertation explores how trade and technology influence the labor market in a developing country context and constructs a framework within which to conceptualize the constraints to employment growth. The first essay examines the nature of deindustrialization in South Africa and the extent to which it is an outcome of import competition from China. I analyze the effect of rising Chinese import competition between 1997 and 2017 on industry-level manufacturing employment. I further analyze the effect of Chinese import competition on local labor markets in South Africa, by exploiting variation in import exposure across districts that are due to initial differences in industrial structure. The results suggest that local districts more exposed to Chinese import competition experienced a reduction in the share of primary sector employment, an increased share of tertiary employment and higher rates of unemployment. The second essay asks two main questions. First, what is the relationship between firm-level innovation and export performance? Second, what is the direct effect of innovation on employment, while accounting for the indirect innovation-export linkages? The essay uses a novel longitudinal administrative dataset of all firms registered to pay tax in South Africa over 2010-2016. The results show a positive and significant relationship between innovation and export performance. In addition, after accounting for self-selection and firm fixed effects, the results show that direct innovation positively impacts employment growth in manufacturing firms, however, R&D-induced exports -- the indirect channel -- negatively impacts employment growth. The overall impact of innovation on employment growth remains positive. In the third essay, I construct a theoretical framework to analyze employment growth that builds on Keynesian and classical approaches to understanding labor demand. The framework is empirically applied on ten developing countries. The results show a strong association between investment and employment growth across the sample of countries, which is stronger for the group of high unemployment countries. Furthermore, for the high unemployment countries, there is a stronger negative association between the capital-intensity of production and employment growth. Therefore, the factors underpinning low investment rates and rising capital-intensity of production are identified as key constraints to employment growth in these countries.

Several studies have highlighted that African manufacturing wages are higher than comparator countries at similar levels of development, which contributes to the continent's lower levels of manufacturing competitiveness. This paper derives unit labor costs - average wages relative to productivity - for two-digit manufacturing sectors across a wide range of developed and developing countries over the 1990-2015 period. We benchmark the unit labor costs to China and estimate the impact of relative unit labor costs on manufacturing sector value added, employment, investment and exports. We find that relative unit labor costs have a smaller effect on manufacturing performance in Africa relative to other developing regions. Further, we find that for Africa, the level and growth of labor productivity have a quantitatively stronger and more robust effect on manufacturing performance than the level and growth of real wages. The results have important implications for industrial policy in African countries.

This paper investigates the effect of innovation on employment growth at the firm level in South Africa. Innovation is typically associated with better export performance at the firm level due to productivity enhancements and new products. However, the link between innovation and employment is more ambiguous. R&D targeted towards product innovation has been typically associated with employment growth. Process innovations may have a positive effect, but also have the potential to reduce the demand for labour. This paper aims to isolate the impact of innovation on export performance to understand the direct and indirect channels through which innovation can influence employment growth. The analysis makes use of a novel administrative dataset of all registered firms in South Africa for the 2010-16 period. The study finds that, overall, direct innovation is positively associated with employment growth; however, the indirect innovation channel is negative and points to the idea that the productivity enhancements necessary for South African exporters to compete internationally might promote labour-saving innovations.

Approximately one-third of the world’s poor live in Africa. More recently, evidence shows that inequality may indeed be a more significant challenge in Africa than in other regions of the developing world. High levels of poverty and inequality persist in Africa despite its being one of the fastest growing regions in the last decade. In particular, six of the world’s ten fastest growing economies during 2001-2010 were in sub-Saharan Africa (SSA) (The Economist and IMF, 2011). Specifically, the fastest growing economies in Africa in this decade (2001-2010) were Angola, followed by Nigeria, Ethiopia, Chad, Mozambique, Rwanda and Equatorial Guinea.

Over the last decade an increasing number of the world’s fastest-growing countries have been in Africa. This recent progress created widespread optimism among many as economic development prospects across many parts of the continent improved. This optimism has, however, been accompanied by concerns regarding the inclusivity and longer-term sustainability of the current growth processes, which have been driven largely by extractive industries. Moreover, situating the observed growth in a broader historical context is important. Similar optimism accompanied the relatively short-lived growth boom in Africa following the Second World War (1950-1970), which provided limited longrun gains and should perhaps serve as a cautionary example in the current growth climate (Broadberry and Gardner, 2013). Going further back, Jerven (2010) suggests that periods of rapid growth, followed by reversals, have characterised economic performance in the region for several centuries, with commodity demand always the driving force behind these ‘booms and busts'.

Africa’s poverty challenge is well-known and widely researched. Approximately a third of the world’s poor live in Africa. More recently, evidence shows that inequality may indeed be a more significant challenge in Africa than in other regions of the developing world. High levels of poverty and inequality persist in Africa in spite of it being one of the fastest growing regions in the last decade. In particular, six of the world’s ten fastest growing economies during 2001-2010 were in sub-Saharan Africa (SSA) (The Economist and IMF, 2011). Specifically, the fastest growing economy in the world in this decade was Angola, followed by Nigeria, Ethiopia, Chad, Mozambique, Rwanda and Equatorial Guinea. For Africa, the period from the 1970s through to the late 1990s can in general be considered lost decades since independence. This period has been characterized by: a combination of serious governance failures; low and sub-optimal investment in health, education and other social services; significant macroeconomic imbalances; poor infrastructure; and structural trade deficits. The post-2000 African economic boom, in contrast, has been built on a composite of factors, including technology (mobile in particular), demographic growth, urbanization and the rise of new dynamic African cities, improved macro-economic policy, enhanced regional cooperation and integration, better targeted social policy, and significant increases in the quality of governance and institutions. In turn, these factors have enabled the growth momentum on the continent to be maintained. Africa’s socio-economic variables have not, however, matched this impressive economic performance; poverty and higher levels of inequality remain a feature of many African economies. Within this context, this paper aims to look more closely at the evolution of inequality on the continent over time, as well as some of its key drivers. There are three stylized facts about the growth-poverty-inequality linkages that have emerged out of studies on developing economies, summarized well by Ferriera and Ravallion (2008). First, growth rates among developing countries are virtually uncorrelated with changes in inequality. Second, in the absence of the above relationship, there must be a strong relationship between growth and changes in poverty. Empirical evidence has strongly shown that faster growing economics reduce poverty more rapidly. Finally, high initial inequality reduces the poverty-reducing power of growth, and more so if inequality rises through the growth process. This paper will build on these stylized facts to shed light on the nature and size of, the changes in, and the drivers of inequality in the African context. The structure of the paper consists of the following: Section I, which provides the introduction; Section II, which provides a brief review of the international literature on growth, poverty and inequality interactions; Section III, which explores the growth-poverty-inequality interactions in the African context and focuses on describing the shape and size of inequality in Africa; Section IV, which investigates in more detail the potential drivers of inequality in Africa; and Section V concludes.

This paper looks to uncover the growth traps and opportunities for the South African economy, with a focus on underlying labour market dynamics. We explore the potential of South Africa's demographic dividend. We also consider the structure of the labour market and the growth-employment interactions, which uncover the skills-biased labour demand path of the economy and a rising trend in the use of labour brokers to source temporary workers. Finally, we show a new labour market trend has emerged: a rise in the share of public sector employment along with higher conditional returns to public sector workers than to those in the private sector.