Working Paper: NBER ID: w28344
Authors: 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.
Keywords: Manufacturing; Productivity; Employment; Structural Change; Tanzania; Ethiopia
JEL Codes: O10; O14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firm Size (L25) | Employment Growth (O49) |
| Firm Size (L25) | Capital-Intensive Production Techniques (D24) |
| Capital-Intensive Production Techniques (D24) | Employment Growth (O49) |
| Small Firm Size (L25) | Employment Growth (O49) |
| Small Firm Size (L25) | Productivity Growth (O49) |
| High Capital Intensity (E22) | Employment Generation Capacity (E22) |