Structural Change, Productivity and Job Creation: Evidence from Tunisia

This paper combines macro and micro level analysis to identify the main sectors and firms that present the greatest potential to boost productive employment in Tunisia. The macro level analysis uses aggregate data at the sectoral level to understand the main characteristics of structural changes, employment, and productivity growth. The micro or firm-level analysis goes into more details of the process of reallocation by using microdata from the Tunisian Business Register covering the last two decades. The empirical results show that a 1% increase in industry output generates twice as much employment as the services sector for the population in the working age groups 15a-64-year-old; while a 1% increase in services output generates twice as much employment as industry sector for youth between 15 and 25 years. In addition, growth in value-added per capita between 2011 and 2018 was "jobless growth". It was driven by increased productivity and participation rate, rather than an increase in the employment rate. Tunisian manufacturing sector is hampered by a waste and a misallocation of resources between firms as capital inputs are directed from their productive uses with too many resources going to less productive firms. Within-firm and between-firm components negatively impact labour productivity growth and slow down efforts aimed at reducing unemployment. This is providing clear evidence of low firm performance as job creators, while entry and exit contributed only negligibly to changes in labour productivity between 2000 and 2020.