Africa&Apos;S Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms

82 Pages Posted: 27 Jan 2021 Last revised: 13 Jun 2021

See all articles by Xinshen Diao

Xinshen Diao

International Food Policy Research Institute (IFPRI)

Mia Ellis

International Food Policy Research Institute (IFPRI)

Margaret McMillan

Tufts University - Department of Economics; International Food Policy Research Institute (IFPRI); National Bureau of Economic Research (NBER)

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS)

Date Written: January 2021

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.

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Suggested Citation

Diao, Xinshen and Ellis, Mia and McMillan, Margaret and Rodrik, Dani, Africa&Apos;S Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms (January 2021). NBER Working Paper No. w28344, Available at SSRN: https://ssrn.com/abstract=3772595

Xinshen Diao (Contact Author)

International Food Policy Research Institute (IFPRI)

Mia Ellis

International Food Policy Research Institute (IFPRI) ( email )

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

Margaret McMillan

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States

International Food Policy Research Institute (IFPRI) ( email )

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

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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