Africa’s Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms

Working Paper
Published on 3 February 2021


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, Diao et al. (2021) 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. Their 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. The authors suggest the poor employment performance of large firms is related to use of capital-intensive techniques associated with global trends in technology.


Xinshen Diao

International Food Policy Research Institute

Mia Ellis

International Food Policy Research Institute

Margaret McMillan

Tufts University

Dani Rodrik

Harvard University