The Unassuming Economist

From a paper by Mulu Gebreeyesus, and Getachew Ahmed Abegaz:

“This paper analyzes Ethiopia’s structural transformation from 2000 to 2022 across four
dimensions: employment, productivity, skill intensity, and tradability. While the country achieved
strong economic growth, averaging 8.9 percent annually, its structural transformation has been
uneven and incomplete. Labor has shifted out of agriculture, but mainly into low-productivity
informal services, while manufacturing’s employment share declined despite policy support.
Aggregate productivity growth, though substantial, was driven largely by within-sector gains, with
minimal contribution from labor reallocation. High-productivity sectors, including manufacturing
and modern services, remain small, capital-intensive, and poorly connected to employment and
exports. Ethiopia’s tradable sector is narrow, dominated by agricultural commodities and air
transport, with limited value-added in manufacturing and ICT. Comparative analysis shows that
while Ethiopia has outpaced many African peers in productivity, it lags in employment absorption
and export diversification, contrasting sharply with East Asia’s inclusive, manufacturing-led
growth. The findings point to a disconnect between output growth and structural inclusion.
Addressing this requires a hybrid strategy that expands labor-intensive manufacturing, upgrades
informal services, aligns skills with market demand, and diversifies tradable activities. Ethiopia’s
experience offers a critical lesson for other developing countries: sustained transformation
depends not only on growth, but on how this growth reallocates labor and resources toward more
productive sectors.”