A.I.D.'s experience with selected employment generation projects

has increasingly funded employment generation (EG) projects, particularly in the off-farm sector. This study reviews over 30 such projects, with a focus on the policy environment as it relates to distortions in foreign exchange, factor, and product pricing. Initial sections present the conflicting views of the employment problem in the literature, summarize current A.I.D. strategies in the area, and present the basic concept underlying the study's approach, namely, that of aggregate production function, according to which (other things being equal) increased growth means increased employment. The paper's central section examines five different types of EG projects - vocational education, labor-intensive infrastructure, Food for Work (FFW), export promotion, and small-scale enterprise (SSE) credit and technical assistance - reviewing each type in terms of its success, policy context, and lessons learned. A final section specifies relevant factors in the policy environment for the five areas studied (though acknowledging the study's weak empirical base) and discusses the study's programming implications. Two areas requiring urgent donor attention are noted: the vitality of the informal sector in creating new jobs and the feasibility of export promotion projects in the present international economic environment. General conclusions on the projects studied are as follows. (1) As tools for EG, vocational education programs frequently had poor payoffs, suggesting caution in their future use. (2) Labor-intensive infrastructure and FFW projects are promising on paper, yet enountered multiple problems and typically affected small numbers of workers. There is a need to strengthen economic analysis of these projects, especially of FFW. (3) Export promotion projects are closely tied to exchange rates - the variable most closely associated with economic growth, according to a World Bank study. (4) SSE projects provided some employment, but sometimes at great cost per job. Overall, the results of EG projects were middling or disappointing. Women were generally given no special consideration, equity was sometimes ill served, management was always difficult, and the projects were hostage to an economic and administrative environment beyond their control. Appendices include a list of conditions promoting the success of the five types of EG projects studied and a list of sectoral policies, suggesting a wide range of policy options.