Employment Effects of Multilateral Development Bank Support
The Case of the African Development Bank
The impact of development aid on employment in Africa is investigated using a set of projects implemented by the African Development Bank (AfDB) in the last 20 years. The results indicate a heterogeneous effect of aid. Projects directed at productive sectors, mainly those that focus on financing small-scale enterprises and microcredit institutions, tend to have the largest employment impact than those focusing on health and education. More importantly, the implied employment effect of AfDB projects is much larger than the potential employment that could be deduced from the aid-growth-employment nexus using macro data, particularly in the last decade. This could be due to the shift in the focus of development assistance away from productive sectors over this period. If inclusive development is the overarching objective of development assistance, then there may be a need to revisit the current allocation of aid to different uses.