Employment fluctuations and sectoral shifts in Egypt: Testing the public/private sectoral shifts hypothesis

Abstract

Purpose

Job creation is the most important challenge facing Egypt today. Economic performance has been uneven over the last three decades, but even in periods of high growth, the job content of growth has not been strong enough to absorb new entrants. The 1990s and early 2000s saw the acceleration in the structural adjustments. The fast growing role of the private sector and the contraction of public sector employment are considered the most important characteristics of this period. The paper aims to discuss these issues.

Design/methodology/approach

The findings of the paper support the view that sectoral shifts, in response to structural transformations, have been an important source of private employment fluctuations in Egypt, and the implications on aggregate employment have varied with the stage of the business cycle in the private sector. Moreover, one of the important findings of the paper shows that public sectoral shifts have caused stronger effects on private employment growth than private sectoral shifts do. However, failure to align public sectoral shifts with growth in the private sector has had a negative effect on employment growth, increasing aggregate unemployment.

Findings

The findings also confirm the crowding-out effect of higher government expenditure on private employment, particularly during a boom. Finally, the findings show that changes in domestic credit going to the private sector as a ratio of private GDP, and higher exports ratio to GDP have statistically significant positive effects on private employment growth.

Originality/value

Overall, the findings signify the importance of policies that aim at increasing the job content of private-led growth in Egypt.

Citation

Hassan, M. and Kandil, M. (2014), "Employment fluctuations and sectoral shifts in Egypt: Testing the public/private sectoral shifts hypothesis", International Journal of Development Issues, Vol. 13 No. 2, pp. 129-154. https://doi.org/10.1108/IJDI-04-2014-0024