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Africa's Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms

Author

Listed:
  • Xinshen Diao
  • Mia Ellis
  • Margaret S. McMillan
  • Dani Rodrik

Abstract

Recent growth accelerations in Africa are characterized by increasing productivity in agriculture, a declining share of the labor force employed in agriculture and declining productivity in modern sectors such as manufacturing. To shed light on this puzzle, we disaggregate firms in the manufacturing sector by size using two newly created panels of manufacturing firms, one for Tanzania covering 2008-2016 and one for Ethiopia covering 1996-2017. Our analysis reveals a dichotomy between larger firms that exhibit superior productivity performance but do not expand employment much, and small firms that absorb employment but do not experience any productivity growth. We suggest the poor employment performance of large firms is related to use of capital-intensive techniques associated with global trends in technology.

Suggested Citation

  • Xinshen Diao & Mia Ellis & Margaret S. McMillan & Dani Rodrik, 2021. "Africa's Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms," NBER Working Papers 28344, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28344
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    Cited by:

    1. Winkler,Deborah Elisabeth & Kruse,Hagen & Aguilar Luna,Luis Alejandro & Maliszewska,Maryla, 2023. "Linking Trade to Jobs, Incomes, and Activities : New Stylized Facts for Low- and Middle-Income Countries," Policy Research Working Paper Series 10635, The World Bank.
    2. Nguimkeu, Pierre & Zeufack, Albert, 2024. "Manufacturing in structural change in Africa," World Development, Elsevier, vol. 177(C).
    3. Asongu, Simplice A. & Bouanza, Jean R.F.K. & Agyemang-Mintah, Peter, 2024. "Globalization in lifelong gender inclusive education for structural transformation in Africa," Economic Systems, Elsevier, vol. 48(4).
    4. Leone, Fabrizio, 2021. "Foreign Ownership and Robot Adoption," CEPREMAP Working Papers (Docweb) 2111, CEPREMAP.
    5. Anton Korinek & Joseph E. Stiglitz, 2021. "Artificial Intelligence, Globalization, and Strategies for Economic Development," Working Papers Series inetwp146, Institute for New Economic Thinking.
    6. Farrokhi, Farid & Lashkaripour, Ahmad & Pellegrina, Heitor S., 2024. "Trade and technology adoption in distorted economies," Journal of International Economics, Elsevier, vol. 150(C).
    7. Thomas Daum & Ygué Patrice Adegbola & Geoffrey Kamau & Alpha Oumar Kergna & Christogonus Daudu & Wahab Akeem Adebowale & Carine Adegbola & Charles Bett & Wellington Mulinge & Roch Cedrique Zossou & Ab, 2024. "Made in Africa – How to make local agricultural machinery manufacturing thrive," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(2), pages 1079-1109, March.
    8. Kouakou Jean Fidele SIÉ, 2023. "Industrial policy and labour productivity growth in Africa: does the technology choice matter?," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 12(1), pages 1-24, December.
    9. Calì, Massimiliano & Presidente, Giorgio, 2021. "Robots For Economic Development," GLO Discussion Paper Series 942, Global Labor Organization (GLO).
    10. repec:ocp:rpecon:rp_05-24 is not listed on IDEAS
    11. Naudé, Wim & Tregenna, Fiona, 2023. "Africa's Industrialization Prospects: A Fresh Look," IZA Discussion Papers 16043, Institute of Labor Economics (IZA).
    12. Hagen Kruse & Emmanuel Mensah & Kunal Sen & Gaaitzen Vries, 2023. "A Manufacturing (Re)Naissance? Industrialization in the Developing World," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(2), pages 439-473, June.
    13. Perra, Elena & Sanfilippo, Marco & Sundaram, Asha, 2024. "Roads, competition, and the informal sector," Journal of Development Economics, Elsevier, vol. 171(C).
    14. Mateo Hoyos, 2025. "North–South Trade as a Source of Uneven Development: A Critical Literature Review on the Role of Absorptive Capacity," Journal of Industry, Competition and Trade, Springer, vol. 25(1), pages 1-21, December.
    15. AJEIGBE Omowumi Monisola & OLOMOLA Phillip Akanni & ADELEKE Oluwayemisi Khadijat, 2021. "Dynamics of Manufacturing Sector Development and Youth Unemployment in Africa," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(7), pages 599-606, July.
    16. Céline Zipfel, 2022. "The demand side of Africa's demographic transition: desired fertility, wealth, and jobs," STICERD - Economic Organisation and Public Policy Discussion Papers Series 71, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    17. Çakır, Muhammet Sait & Aydemir, Resul, 2022. "A Dutch disease approach into the premature deindustrialization," Economic Systems, Elsevier, vol. 46(4).
    18. Erumban, Abdul A. & de Vries, Gaaitzen J., 2024. "Structural change and poverty reduction in developing economies," World Development, Elsevier, vol. 181(C).
    19. Emmanuel Umoru Haruna & Usman Alhassan, 2022. "Does digitalization limit the proliferation of the shadow economy in African countries? An in‐depth panel analysis," African Development Review, African Development Bank, vol. 34(S1), pages 34-62, July.
    20. Dani Rodrik, 2023. "A Comment on: “Presidential Address: Demand‐Side Constraints in Development: The Role of Market Size, Trade, and (In)Equality,” by Pinelopi Koujianou Goldberg and Tristan Reed," Econometrica, Econometric Society, vol. 91(6), pages 1959-1962, November.
    21. AJEIGBE Omowumi Monisola & OLOMOLA Phillip Akanni & ADELEKE Oluwayemisi Khadijat, 2021. "Dynamics of Manufacturing Sector Development and Youth Unemployment in Africa," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(07), pages 599-606, July.
    22. Jörg Mayer, 2021. "Development strategies for middle‐income countries in a digital world—Insights from modern trade economics," The World Economy, Wiley Blackwell, vol. 44(9), pages 2515-2546, September.
    23. repec:ocp:rpaper:rp-0524 is not listed on IDEAS
    24. Abdul A. Erumban & Gaaitzen de Vries, 2021. "Industrialization in developing countries: is it related to poverty reduction?," WIDER Working Paper Series wp-2021-172, World Institute for Development Economic Research (UNU-WIDER).
    25. Hyojung Kang, 2022. "The Effect of Foreign Direct Investment on Employment in Manufacturing Industry Sectors in Sub-Saharan African Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper2205, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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