The Role of Micro and Small Scale Enterprises in the Ethiopian Economy, Government Intervention and Alternative Strategies: A CGE Analysis

40 Pages Posted: 9 May 2018 Last revised: 12 Jul 2018

See all articles by Engida Ermias

Engida Ermias

International Food Policy Research Institute (IFPRI); Institute for Food and Resource Economics, Students

Mekdim Dereje Regassa

International Food Policy Research Institute (IFPRI)

Ibrahim Worku Hassen

Ethiopian Development Research Institute

Feiruz Yimer

Saba Yifredew

Addis Ababa University

Date Written: March 1, 2017

Abstract

Given the fact that Micro and Small scale enterprises (MSEs) are high on the Ethiopian government’s agenda for mid-term growth and transformation plan (GTP), this study aims to investigate the major contributions and the potential of this sector to the Ethiopian economy. Using a CGE modeling approach, we assess the role of MSEs towards the major development goals of the government: unemployment and poverty reduction. Three simulation scenarios were designed based on the current MSE development plan but with different implementation strategies. The strategy that the government is currently following to implement the MSE development plan was found to be performing the best on expanding overall production, but failed to tackle the critical issues of poverty and unemployment reduction. However, other alternative strategies were found to give the country the best solutions to these development concerns as well as investment. Female unemployment also reduced the most in these alternative scenarios. This shows that the MSE sector has the potential to meet the envisaged developmental goals in Ethiopia, but strategy adjustment is needed.

Suggested Citation

Ermias, Engida and Regassa, Mekdim Dereje and Hassen, Ibrahim Worku and Yimer, Feiruz and Yifredew, Saba, The Role of Micro and Small Scale Enterprises in the Ethiopian Economy, Government Intervention and Alternative Strategies: A CGE Analysis (March 1, 2017). Partnership for Economic Policy Working Paper No. 2017-18. Available at SSRN: https://ssrn.com/abstract=3163544 or http://dx.doi.org/10.2139/ssrn.3163544

Engida Ermias

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

HOME PAGE: http://www.ifpri.org

Institute for Food and Resource Economics, Students ( email )

Bonn
Germany

Mekdim Dereje Regassa

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Ibrahim Worku Hassen

Ethiopian Development Research Institute ( email )

P.O. Box 2479
Addis Ababa
Ethiopia

Saba Yifredew (Contact Author)

Addis Ababa University ( email )

King George VI St
Addis Ababa, 1000
Ethiopia

No contact information is available for Feiruz Yimer

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