The role of development finance institutions in promoting jobs and structural transformation: a quantitative assessment

Working and discussion papers
March 2013
Marie-Agnès Jouanjean and Dirk Willem te Velde

This study provides a quantitative assessment on the role of Development Finance Institutions (DFIs) in generating jobs, increasing labour productivity and promoting structural transformation.

The paper first argues that job creation, productivity and structural change are the main development challenges for low income countries at present and DFIs have begun to acknowledge this.

It then suggests ways in which the operations of DFIs affect employment creation and structural change, both through static (additionality and composition) and dynamic (through linkages and technical change) effects.

This paper conducts a number of quantitative analyses . First, it provides production function based estimates of direct and indirect jobs created by a range of DFIs. It estimates how many jobs would be created assuming that DFIs provide additional investment into a country.

Using a set of assumptions, DFIs are estimated to have created 2.6 million jobs in developing countries in 2007. In other words, according to this method, if DFIs would withdraw their funding, 2.6 million jobs would be lost.