Unit Labour Costs, International Competitiveness, and Exports: The Case of Senegal

Despite some favourable conditions and a number of policy reforms, Senegal's participation in the global economy remains tenuous. This paper uses a Ricardian framework to study Senegal's international competitiveness in manufacturing. Wages, productivity and unit labour costs in Senegal are compared to those of other developing countries. Senegal's labour productivity has grown much more slowly than in successful emerging economies. The 1994 devaluation of the CFA franc has dramatically improved Senegal's international competitiveness but further improvements in competitiveness depend on productivity growth given the constraint of the fixed exchange rate. We find a significant effect of relative unit labour costs on exports, particularly of manufactured goods. Sustained export?led growth, however, requires additional structural reforms.