Priorities for Boosting Employment in Sub-Saharan Africa: Evidence for Mozambique

Abstract

Should policy-makers, including foreign donors, focus employment strategies in sub-Saharan Africa on strengthening access to formal wage employment or on raising productivity in the informal sector? We examine the evidence in Mozambique and show that crude distinctions between formality and informality are not illuminating. The observed welfare advantage of formal sector workers essentially derives from differences in endowments and local conditions. Non-agricultural informal work can yield higher returns than formal work. The implication is that the informal sector must not be marginalized; and raising productivity in agriculture must be accorded a central place in boosting employment.