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Uneven Gains: Sectoral Employment Elasticity and Structural Transformation in Rwanda, 1990-2018
Subject area: Science,Engineering and Technology · Area of research: Employment Elasticity, Structural Transformation
Abstract
Rwanda?s structural transformation has progressed steadily over the past two decades, yet the employment impact of sectoral growth remains uneven and under examined. This study analyzes how output growth in manufacturing and services translates into job creation, using time-series data from 1990 to 2018 drawn from the GGDC Economic Transformation Database and national labor force surveys. Sector-specific employment elasticities are estimated using log-log and first-differenced regression models, complemented by stationarity and cointegration tests. The results show a sharp divergence in employment responsiveness: manufacturing exhibits a high short-run elasticity of 1.02, indicating strong labor absorption potential, while services record a much lower and more volatile elasticity of 0.29. Neither sector demonstrates a stable long-run relationship between output and employment, underscoring the dominance of short-run dynamics in shaping labor market outcomes. Although services account for the bulk of employment, jobs are increasingly concentrated in low-productivity, informal segments. In contrast, manufacturing though smaller offers more inclusive employment prospects when supported by industrial policy. The findings highlight the uneven nature of Rwanda?s employment gains across sectors and underscore the importance of dual-sector strategies to boost both job quantity and job quality as structural transformation advances.
Keywords
Employment elasticity, job creation, structural transformation, manufacturing, services, labor absorption, time-series analysis, Rwanda, inclusive growth, industrial policy.
How to cite this paper
@article{1708728,
author = {Mukasa Stanley , Aliyu Umar },
title = {Uneven Gains: Sectoral Employment Elasticity and Structural Transformation in Rwanda, 1990-2018},
journal = {Iconic Research And Engineering Journals},
year = {2025},
volume = {8},
number = {11},
pages = {1670-1679},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1708728.pdf},
abstract = {Rwanda?s structural transformation has progressed steadily over the past two decades, yet the employment impact of sectoral growth remains uneven and under examined. This study analyzes how output growth in manufacturing and services translates into job creation, using time-series data from 1990 to 2018 drawn from the GGDC Economic Transformation Database and national labor force surveys. Sector-specific employment elasticities are estimated using log-log and first-differenced regression models, complemented by stationarity and cointegration tests. The results show a sharp divergence in employment responsiveness: manufacturing exhibits a high short-run elasticity of 1.02, indicating strong labor absorption potential, while services record a much lower and more volatile elasticity of 0.29. Neither sector demonstrates a stable long-run relationship between output and employment, underscoring the dominance of short-run dynamics in shaping labor market outcomes. Although services account for the bulk of employment, jobs are increasingly concentrated in low-productivity, informal segments. In contrast, manufacturing though smaller offers more inclusive employment prospects when supported by industrial policy. The findings highlight the uneven nature of Rwanda?s employment gains across sectors and underscore the importance of dual-sector strategies to boost both job quantity and job quality as structural transformation advances.},
keywords = {Employment elasticity, job creation, structural transformation, manufacturing, services, labor absorption, time-series analysis, Rwanda, inclusive growth, industrial policy.},
month = {May},
}