Effects of Labour Costs on Different Branches of Service Production in Benin

Andre  Houndjo,

Effects of Labour Costs on Different Branches of Service Production in Benin

Abstract:

Context and objectives : Labour costs are a complex and multifaceted element that can have a significant impact on employment, business competitiveness and worker well-being. It is important to note that the impact of labour costs on employment can vary according to specific economic contexts, the policies in place and the characteristics of different sectors of activity. In other words, the effects of labour costs on employment are complex and depend on many other economic, social and political factors. The aim of the study is to analyse the influence of labour costs on production in industries such as trade, transport and communication, and hotels and restaurants in Benin. Methods : This study is based on heterogeneous quantitative data from the Direction Générale des Impôts, the Institut National de la Statistique et de la Démographie (INStaD) and the BCEAO website for the period 2014 to 2021. Our base is a sample representing 90% of companies in the formal sector, sorted in descending order according to the company paying the employer's payment on wages (VPS). We performed a descriptive analysis followed by an econometric analysis using Eviews9 and STATA 15 software. Results : The results of estimating the model show that the labour cost index (LCI) in the three sectors has a significant and positive effect on the value added of companies only in the long term. Labour costs therefore have a positive effect on industry output. However, the labour cost index (LCI) in the three sectors has no significant effect on value added in the short term. With a view to maintaining the evolutionary trend of the labour cost index (LCI) on the one hand, and preserving the positive effect of the labour cost index (LCI) on business output on the other, operational recommendations have been made based on the results of our analyses. Conclusion : An Error Correction Model (ECM) was used to validate the three models for the three industries covered by our study. On the basis of our results, our study has made a number of recommendations, the implementation of which will make it possible to increase the effect of labour costs on production. Limitations of the study : The study suffers from certain limitations, namely the non-significance of certain variables. Other studies need to be carried out on the same subject in order to identify other factors involved in the design of the labour cost index.

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