Our paper is related to two literatures. Several papers have estimated the correlates of employment growth in large cross-sections of countries (Crivelli, Furceri, and Toujas-Bernaté 2012; Kapsos 2005). World Bank (2024) summarizes estimates of the elasticity of employment with respect to output growth from this body of literature. Relative to this literature, we have two key contributions. First, a key distinguishing feature of our analysis is that we examine changes in employment ratios, rather than employment growth. This is critical because many EMDEs have rapidly growing working-age populations, and it is difficult to interpret a given level of employment growth without controlling for population growth. Second, our analysis focuses on long run outcomes, whereas the above mentioned papers often focus on short run effects.

A second strand of literature uses the World Bank’s Enterprise Surveys to study firm-level employment, often in specific countries. (See, for example, Aga and Francis 2015; Ayyagari, Demirgüç-Kunt, and Maksimovic 2011; Khan 2023). Relative to this literature, our key contribution is to use these Surveys to link long run aggregate employment outcomes to firm-level constraints. Ours is the first analysis of the extent to which government regulations on labor, land, finance, and trade help or hinder the absorption of a growing working-age population into employment in EMDEs.

The remainder of the paper is organized as follows. Section 2 documents the data and methodology. Section 3 summarizes patterns in steady-state EWAPs and the effect of productivity and population growth. Section 4 shows the correlates of these steady-state EWAPs. Section 5 concludes and discusses the policy implications.

# **2. Methodology and data**

## **2.1 Conceptual framework**

Economy-wide employment can be thought of as the equilibrium outcome of labor supply by households that need to earn income to consume and labor demand by firms that need labor as an input into production. The natural starting point for thinking about dynamics in aggregate productivity and employment is the one-sector growth model. One limitation of this framework for understanding dynamics in developing economies is that it abstracts from the process of structural transformation, which is another key dynamic process that potentially impacts both labor supply and labor demand. Herrendorf, Rogerson, and Valentinyi (2014) model a stylized economy with three sectors—agriculture, industry, and services—that together produce aggregate output _Y_ . For our purposes it is sufficient to consider an economy with two sectors: agriculture (a) and nonagriculture (n). Each sector _j_ uses a Cobb-Douglas function technology to produce output _Yj_ (sold at the price _pj_ ) using labor _Lj_ and other inputs _Kj_ (including intermediate goods) with technology _Aj_ : Aggregate output (and income) is then given by: This framework should be seen as a simple benchmark. One can generalize it along several dimensions: to allow for differences in factor intensity across sectors, richer patterns of substitution between factors, non-neutral forms of technical change, and multiple types of labor.

As in a one-sector model, increases in overall productivity in this framework will raise wages and income, and affect overall demand and supply of labor. But this framework also features additional 4