A Possible Triangle: Employment, Aid, and Mineral Wealth

Abstract

Over the last decades, aid has been a subject in any discussion on economic development in Mozambique. However, both the literature and the policymaking have paid scant attention to the effects of aid on the structure of the Mozambican economy. In particular, aid effects on employment are only now beginning to be considered quantitatively in the literature, despite its potentially important policy implications. For Mozambique, this investigation is of particular interest, since the country is so dependent on aid. In this context, some observers have been critical of its effects on the economy (see, e.g., Hanlon and Smart 2009), while others suggest that aid might have an impact on the quality of institutions and on the citizen–government relationship (Hodges and Tibana 2004; de Renzio and Hanlon 2008). Whether aid creates employment and in what sectors are related issues that also need to be addressed, given the policy relevance of the topic, as well as debates about the effects of aid on the economy. Moreover, according to de Brito (2009), amongst others, since 2005 Mozambique has entered a new stage in terms of its economic history: the country’s economic development is now based on recent mineral discoveries, which are changing the structures of external dependence, wealth distribution, growth, and patterns of employment creation. This change is leaving unscathed the characteristics of Mozambique as a ‘rent economy’ since it is moving from aid to mineral resources as main drivers of economic activity (Auty 2007). Given these circumstances, an assessment of the role played by aid in an area of economic development such as employment creation is all the more important. It may help our understanding of what has happened beneath the surface of the Mozambican miracle of economic growth and it could also help predict the evolution of the ‘rent economy’ scheme experienced by Mozambique.