Urban Agglomerations and Employment Transitions in Ethiopia

38 Pages Posted: 16 Mar 2020

See all articles by Akito Kamei

Akito Kamei

University of Chicago; University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics, Students

Shohei Nakamura

World Bank; World Bank

Date Written: March 13, 2020

Abstract

Agglomeration boosts economic growth. A vast literature has empirically assessed the effects of agglomeration by estimating the city population elasticity on wages. This conventional approach is not necessarily suitable for analyzing urbanization at the early stage in developing countries, where a majority of urban workers engage in self-employment and/or informal jobs. Focusing on one of the poorest and largest among those countries, this paper sheds light on an aspect of urbanization and agglomeration: the transition in the mode of labor from self-employment/informal jobs to wage employment/formal jobs. Applying the instrumental variable approach to national labor force survey data sets, the analysis underscores several labor market transitions across space in urban Ethiopia. First, the town population size and the share of workers with wage employment are strongly correlated. The probability of engaging in wage work increases by 4.5 percentage points with a log increase in population size. Second, this relationship is particularly strong among disadvantaged workers, such as the female, young, and/or less educated population. Finally, the study documents higher labor force participation and lower underemployment in larger towns.

Keywords: Employment and Unemployment, Educational Sciences, Labor Markets, Inequality, Wages, Compensation & Benefits

Suggested Citation

Kamei, Akito and Nakamura, Shohei, Urban Agglomerations and Employment Transitions in Ethiopia (March 13, 2020). World Bank Policy Research Working Paper No. 9184, Available at SSRN: https://ssrn.com/abstract=3554093

Akito Kamei (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics, Students ( email )

Champaign, IL
United States

Shohei Nakamura

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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