Working Paper: CEPR ID: DP15650
Authors: Xinshen Diao; Mia Ellis; Margaret 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.
Keywords: No keywords provided
JEL Codes: O14; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Larger firms (L25) | Superior productivity performance (O49) |
| Larger firms (L25) | Negative employment growth (F66) |
| Small firms (L25) | Positive employment growth (O49) |
| Poor employment performance of larger firms (L25) | Use of capital-intensive production techniques (D24) |
| Use of capital-intensive production techniques (D24) | Global technological trends (O30) |
| Dichotomy in productivity and employment performance (E24) | Demand-driven structural change (L16) |
| Higher capital intensity of larger firms (D25) | Hinders ability to generate employment (F66) |