I am writing a Senior thesis, and I was wondering if any of you dopers would know something about Macroeconmics.
I’ve run into a situation where the small country I’m studying has a high percentage of exports, and also shows a decrease in unemployment. after 1994. However, Employment decreases in all of the major export sectors. Most of the export sectors are manufacturing and agriculture related, which (especially with agriculture) could possibly decrease while showing overall turnover growth.
Now, the situation is this: These non-service sectors are a large part of the GDP because they are the foundation of the export economy. However they have all experienced a decreasing need for employees. Probably due to eficiency of new technology. I could explore capital investment, but its not really the point I’m getting at.
Is there some kind of precedent or theory or any kind of other academic discussion on the relation between that and the increase in the service sector? I mean specifically showing how they are related (Eg showing how increasing efficiency in non-service industries is related to service industry growth?)
What I am doing is analyzing the causes of a major drop in unemplyment since 1994. I don’t particularly need to tie them together, but it would be nice. If any of you could point me to any kind of literature, it would be great, but I am not sure how qualified it would be. Normally I would go to my advisor, but I want to finish what I’m doing before I have him review what I have.
What I am getting at is, if exports are a high percentage of GDP, and export industries showed growth in sales, yet decline in employment, then is there a relation between a more efficient industry/ag and increased need for service employment? It would be nice if there was somethign I could use as a source, but its not mandatory.
Just one very quick idea, but I vaguely remember a similar topic discussed in an economics lesson I attended last semester (the professor seemed to have his own, somewhat off the main stream opinion on anything, but in this case it sounded plausible to me). He argued that the widely observed effect that employment decreases in the industrial sector and increases in the service sector is largely due to outsourcing. In the past, many factories used to do a lot of thins themselves - they had their own cleaning staff, for example. Nowadays many companies subcontract things like this to specialized suppliers. Statistically, the result is that the factory (industry) sheds one job while the independent cleaners offer one vacancy, although in reality it’s the same employment.
I really can’t be sure from the OP, but you may look into Dutch Disease. That’s when a booming export industry causes a contraction in other export industries but not domestic industries.
Been 20 years since I taught econ (private sector is more lucrative), but I don’t recall any specific theory. I think it is may be one or combination of the following:
Yes, rising labor productivity in an industrial sector as capital investment increases would lead to less employment needs in that sector. The decrease in unemployment may be explained by increase in employment in the service sector. Look at the U.S. Since the 1982 recession, productivity has risen, industrial employment dropped and service sector employment increased (and we are a net importer, big time).
Another factor is how good is the employment reporting in the country you are looking at? The U.S. has some pretty good data tracking, but we still argue over the real unemployment rate because of differences in the survey techniques. Part of the problem may be how data is reported.
An adendum to #2, a possible wealth effect? People just aren’t looking for work, so they aren’t as unemployed because they aren’t seeking employment?
Has government employment grown and these people don’t reported in private sector employment reports?
Thanks for the comments, all.
If anyone is interested, I just found a good paper (PDF) about the various theories for this shift that is commonly seen in western economies.
It appears, Schnitte, that the reason given by you is one of them.