Why do some countries create more jobsthan others? To consider this question, in this paper wefocus on one of the most basic relationships, between growthand employment. In practice, the private sector respondsvery differently to growth (and decline) across countries.Understanding the patterns and drivers of private sectordecisions to expand and shed jobs may be important to guidepolicy approaches for job creation. This paper analyzes theoutput-employment relationship in the context of businesscycles at three levels: the macro-economy; industry (inmanufacturing); and firms. The results highlight majordifferences in private sector job creation responsiveness togrowth across stages of development and economic structures,but a critical finding is that economies (and firms) whereformal sector job creation was more responsive to growthcycles generated more jobs overall. In addition, resultsfrom both the macro analysis and the sectoral analysissuggests significant complementarity between capital andlabor. Finally, the findings may help to frame a broadpolicy agenda for job creation, including: macro-economicfundamentals, responsive labor markets, access to finance,competition, and a facilitative business regulatoryenvironment. These are not surprising, but neverthelessframe a set of issues that could be explored in further research.
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