1. IEE Institute of Development Research and Development Policy Institut für Entwicklungsforschung und Entwicklungspolitik (IEE) Employment Effects of Private Investment: Theory-based Guesstimates and Estimates Let’s Work Partnership Workshop, London, September 16-17, 2015 Wilhelm Löwenstein | Let‘s Work, 16/17 September 20151

2. IEE Contents  Starting Position, ToRs, Challenges  Segmented Labor Market + Neoclassical Formal Economy Model = Formal/Informal Sector Interactions  Calculating and Estimating Job Creation  Conclusions Wilhelm Löwenstein | Let‘s Work, 16/17 September 20152 Marketing: Report on a nice beneficiary study (micro-level) capturing the change in income created by providing rural poor with water http://development-research.org/images/pdf/working_papers/wp-210.pdf

3. IEE Starting Position, ToRs, Challenges Wilhelm Löwenstein | Let‘s Work, 16/17 September 20153 NGA, Reuters BRA?, Inclusivecities VNM, DEG PHL, Philstar Direct Indirect Induced Jobs? ToRs: Development of a t-b tool to guesstimate private investments’ net job effects based on available data. T-Challenges: Full employment assumption => DCs modelled as if they were ICs: No informal sector, no underemployment, no involuntary unemployment. E-Challenges: No labor force data distinguishing between formal and informal employment.

4. IEE Segmented Labor Market + Neoclassical Formal Economy Model = Formal/Informal Sector Interactions Wilhelm Löwenstein | Let‘s Work, 16/17 September 20154 A. Guesstimates: Calculating Job Creation All people (15+) who supply labor for the (formal and informal) production of goods and services. B. Estimating the Determinants of Job Creation All people (15+) who live on 2 $ a day (PPP) or more. People below are assumed to either work in the informal sector (incl. subsistence agriculture) or to be economically inactive. WDI data series WDI + DFI-information WDI but fuzzy No data, implicitly in K f α = 0.33

5. IEE A. Calculating Job Creation Wilhelm Löwenstein | Let‘s Work, 16/17 September 20155

6. IEE A. Calculating Job Creation Job creation per 10,000 US$ investment in developing countries (2000-2010) Wilhelm Löwenstein | Let‘s Work, 16/17 September 20156 I = US$ 63 Mio., Bugoye, UGA ODI: up to 12,000 jobs WLoe: 80,500 jobs I = US$ 1 bio., PHL SR: up to 110,000 jobs WLoe PHL: 105,000 jobs

7. IEE B. Estimating the Determinants of Job Creation Econometrics: Panel-Data Estimates (1985-2012, unbalanced panel) Wilhelm Löwenstein | Let‘s Work, 16/17 September 20157 Dependent variable: lnL f _2 (  gL fB ) OLS I (pooled panel) OLS II (pooled panel) FE- regression I FE- regression II Constant11.002***12,906***19.760***19.912*** ln I f /Y f (  gK f ).647***.693***.269***.294*** ln wf2(  gw f ) -.917***-.996***-.750***-762*** ln wf1.25 (p-control)1.250***1.105*** D_Landlocked (  gA f ) -1.281*** D_Islam (  gA f ).379*** CPIA (psmi  gA f ).229**.189 ln gN (t-control).0203 R2R2 adj..118***adj..242***within.598***within.612*** Obs. (countries)692 (96) 557 (64)524 (60) Results: Empirical evidence is large (R 2, signs, p-values), even predicted proportionality of gL f and gK f can’t be rejected (CI:.395 .693  992)

8. IEE B. Estimating the Determinants of Job Creation Econometrics: Panel-Data Estimates (1985-2012, unbalanced panel) Wilhelm Löwenstein | Let‘s Work, 16/17 September 20158

9. IEE Conclusions Wilhelm Löwenstein | Let‘s Work, 16/17 September 20159  Model: Fits well to DCs‘ realities. High validity (t+e).  Data used for calculations: From WDI, comprehensive time series, some of them fuzzy.  Data used for estimations: From WDI, few (central) series fragmentary, rest comprehensive.  Results represent magnitudes rather than point estimates provide figures on formal-sector job equivalents paid at AVG formal sector wage are country & period specific averages, implicitly reflecting sectoral GDP and capital stock shares, average formal sector wages and inter-industry linkages provide information on formal sector labor productivity, earnings, and on impacts on poverty eradication can (cautiously) be decomposed for sectors (links to I/O, CGE) can be decomposed in terms of gender (fuzzy) can be re-estimated using time series for individual countries (=> country specific coefficients)

10. IEE Theory-based Guesstimates and Estimates Wilhelm Löwenstein | Let‘s Work, 16/17 September 201510 Thank you very much for your attention!