Sectoral employment multipliers in Rwanda: Comparing local multipliers and input-output analysis

Fast population growth in sub-Saharan Africa questions the ability of the labor market to absorb large inflows of workers. This paper measures the employment po- tential of agriculture, tradable and nontradable sectors in Rwanda, by estimating local multipliers, a methodology based on census data that focuses on local labor markets. We show that the tradable sector displays the largest employment potential as 1 job created in the tradable sector leads to the creation of 6 to 7 jobs in the local eco- nomy. Additionally, the multipliers associated with the nontradable sector are positive but much smaller in comparison. Lastly, the multipliers associated with agriculture are negative highlighting the gradual shift away from subsistence farming. Contrast- ingly, alternative employment multipliers based on input-output data underestimate the importance of the tradable sector and overestimate the role of agriculture for jobs creation.