to International Development in Generating Employment
A Cross-Country Analysis
Objective
Increasingly, international development practitioners are adopting business approaches to attack poverty in emerging economies. This paper examines the determinants of cost-effectiveness of one such approach in generating employment.
Data/Methods
Chemonics International Inc., an international development consulting firm, has developed a “buyer-led approach” to increase business sales and create jobs. The approach is demand-driven, results-oriented, accountable, disciplined, transactional, and problem-solving in character. Chemonics has applied the buyer-led approach in more than a dozen USAID programs worldwide.
For buyer-led programs in seven countries – Armenia, Azerbaijan, Bolivia, Kosovo, Nigeria, Paraguay, and Peru – comparable data exist on program costs and resultant sales and employment. A previous paper analyzed the determinants of differences among programs in their cost-effectiveness in generating new client sales. It then estimated the internal rate of return on USAID’s investment in one case. It found the principal determinants of cost-effectiveness and return on investment to include program longevity, geographic spread, and management discipline.[i]
This paper looks at cost-effectiveness from an employment perspective. The first part analyzes qualitatively the reasons for differences among programs in generating new employment. The second part limits itself to the buyer-led program in Peru and examines how different products and services lend themselves to the generation of new employment in different degrees. Both parts of the paper draw out operational lessons for the design and implementation of future programs.
Expected Results
Cost-effectiveness. This part of the paper compares two ratios among the seven programs. The first is the ratio of person-days of new employment to dollars of program costs. The second is the ratio of person-days of new employment to dollars of new client sales. The first ratio is a direct measure of cost-effectiveness. The second is a measure of labor intensity. In both cases, the paper examines the degree to which program longevity, geographic spread, and management discipline can explain observed differences in new employment as they do in explaining observed differences in cost-effectiveness in expanding client sales. It also examines differences in backward linkages among programs, and how the very design of international development programs can limit the potential for employment generation even before they begin.
Product analysis. The results of the Poverty Reduction and Alleviation (PRA) program in Peru point up dramatic differences in the cost-effectiveness of different kinds of products in bringing about growth in client sales.[ii] The second part of this paper examines the degree to which those results carry over to the employment sphere, specifically, whether higher value-added products and services generate higher levels of new employment.
The findings of this paper call into question elements of conventional wisdom on how to do international development and, as such, offer much food for thought and discussion at the IAES Conference.