Growth and Job Quality in South Asia
T
his chapter looks at the growth context in South Asia in which labor market outcomes are embedded. The first section decomposes growth in aggregate gross domestic product (GDP) per worker (or aggregate labor productivity) during the past three decades into the contributions of physical and human capital accumulation and changes in total factor productivity (TFP). The second section explores how sources of growth may be different in the future. The third section examines South Asia’s track record regarding the number and quality of jobs created. The last section argues for moving ahead quickly with reforms in order to absorb the rapidly growing number of new entrants to the labor market at rising levels of labor productivity even in situations of lower economic growth.
Economic growth in South Asia Improving job quality for most segments of the labor force can usually occur only in a growing economy. South Asia has seen an acceleration of growth over the three decades since 1980 that is second only to that of East Asia (figure 2.1).1 But growth experiences have varied within South Asia (figure 2.2).
2
Growth in per capita GDP has accelerated, particularly since the 1980s, in Bangladesh and India. Bhutan saw generally high growth starting in the 1980s, albeit with some fluctuations. Maldives also enjoyed high growth, although it experienced a deceleration between the 1990s and the first decade of the 21st century. Per capita growth has been marked by volatility around a broadly declining trend since the 1980s in Pakistan and has stagnated in Nepal. Sri Lanka has witnessed an acceleration of growth over the last five decades, except for a dip in the 1980s, avoiding the slowdown or stagnation of the 1970s that affected the rest of the region.
Aggregate labor productivity growth Growth in aggregate output per worker, or aggregate labor productivity, may be decomposed into two factors:2 • “Extensive” growth, comprising growth in physical capital per worker (capital deepening) and growth of human capital per worker (education) • “Intensive” growth, comprising growth in TFP—a combination of changes in the efficiency with which inputs are used and changes in technology. 49