Publication: Africa's Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms
Loading...
Files in English
Embargoed until 2026-02-10
Embargoed until 2026-02-10
Date
2025-05-26
ISSN
Published
2025-05-26
Editor(s)
Abstract
Recent growth accelerations in Africa are characterized by declining shares of the labor force employed in agriculture, increasing labor productivity in agriculture, and declining labor productivity in modern sectors such as manufacturing. To shed light on this puzzle, this study disaggregates firms in the manufacturing sector by average size, using two newly created firm-level panels covering Tanzania (2008-2016) and Ethiopia (1996-2017). The analysis identifies a dichotomy between larger firms with superior productivity performance that do not expand employment and small firms that absorb employment but do not experience much productivity growth. Large, more productive firms use highly capital-intensive techniques, in line with global technology trends, but significantly greater than what would be expected based on these countries’ income levels or relative factor endowments.
Link to Data Set
Citation
“Diao, Xinshen; Ellis, Mia; McMillan, Margaret; Rodrik, Dani. 2025. Africa's Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms. © World Bank. http://hdl.handle.net/10986/43353 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Citations
- Cited 1 times in Scopus (view citations)
Collections
Related items
Showing items related by metadata.
No results found.
Users also downloaded
Showing related downloaded files
Publication Poverty, Prosperity, and Planet Report 2024(Washington, DC: World Bank, 2024-10-15)The Poverty, Prosperity, and Planet Report 2024 is the latest edition of the series formerly known as Poverty and Shared Prosperity. The report emphasizes that reducing poverty and increasing shared prosperity must be achieved in ways that do not come at unacceptably high costs to the environment. The current “polycrisis”—where the multiple crises of slow economic growth, increased fragility, climate risks, and heightened uncertainty have come together at the same time—makes national development strategies and international cooperation difficult. Offering the first post-Coronavirus (COVID)-19 pandemic assessment of global progress on this interlinked agenda, the report finds that global poverty reduction has resumed but at a pace slower than before the COVID-19 crisis. Nearly 700 million people worldwide live in extreme poverty with less than US$2.15 per person per day. Progress has essentially plateaued amid lower economic growth and the impacts of COVID-19 and other crises. Today, extreme poverty is concentrated mostly in Sub-Saharan Africa and fragile settings. At a higher standard more typical of upper-middle-income countries—US$6.85 per person per day—almost one-half of the world is living in poverty. The report also provides evidence that the number of countries that have high levels of income inequality has declined considerably during the past two decades, but the pace of improvements in shared prosperity has slowed, and that inequality remains high in Latin America and the Caribbean and Sub-Saharan Africa. Worldwide, people’s incomes today would need to increase fivefold on average to reach a minimum prosperity threshold of US$25 per person per day. Where there has been progress in poverty reduction and shared prosperity, there is evidence of an increasing ability of countries to manage natural hazards, but climate risks are significantly higher in the poorest settings. Nearly one in five people globally is at risk of experiencing welfare losses due to an extreme weather event from which they will struggle to recover. The interconnected issues of climate change and poverty call for a united and inclusive effort from the global community. Development cooperation stakeholders—from governments, nongovernmental organizations, and the private sector to communities and citizens acting locally in every corner of the globe—hold pivotal roles in promoting fair and sustainable transitions. By emphasizing strategies that yield multiple benefits and diligently monitoring and addressing trade-offs, we can strive toward a future that is prosperous, equitable, and resilient.Publication World Bank Annual Report 2024(Washington, DC: World Bank, 2024-10-25)This annual report, which covers the period from July 1, 2023, to June 30, 2024, has been prepared by the Executive Directors of both the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)—collectively known as the World Bank—in accordance with the respective bylaws of the two institutions. Ajay Banga, President of the World Bank Group and Chairman of the Board of Executive Directors, has submitted this report, together with the accompanying administrative budgets and audited financial statements, to the Board of Governors.Publication Extreme Weather, Extreme Costs(Washington, DC: World Bank, 2025-01-30)Climate risk management in Malawi's financial sector is a pressing issue that demands immediate attention. Globally, the urgency of addressing climate change is escalating, and many African countries are taking proactive steps to mitigate its financial implications. Kenya, Tanzania, and Morocco, among others, have already implemented supervisory guidelines for climate risk management to safeguard their financial systems and economies. The Reserve Bank of Malawi (RBM), recognizing the critical importance of this issue, has similarly initiated the development of climate risk supervisory guidelines for banks and are considering doing the same for the insurance sector. To inform these policy efforts, RBM, with the support of the World Bank, conducted this assessment to better understand the impacts of climate change on the insurance and banking sectors in Malawi. This report’s analysis is the first of its kind for Malawi, and one of the first climate-related financial risk analyses in the Africa region that looks at the impact of climate change on the insurance sector in addition to the banking sector. The ultimate objective of this report is to build a roadmap for RBM to better assess and manage climate-related financial risks for banks and insurers.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication Inequalities in Sub-Saharan Africa(Washington, DC: World Bank, 2025-01-17)The growing disparity between the rich and poor remains a critical challenge, affecting countries across all continents, irrespective of their per capita gross domestic product. This widening gap not only impedes efforts to eradicate extreme poverty but also hinders progress toward social justice and resilience-building. Rising inequalities pose substantial barriers to sustainable development, and it is within this context that this book, 'Inequalities in Sub-Saharan Africa: Multidimensional Perspectives and Future Challenges', contributes to ongoing debates, offering a comprehensive analysis of the current challenges and future perspectives of inequality on the African continent. Despite the intensification of calls for wealth taxation and inequality reduction, progress has been slow. A key challenge lies in creating a viable political path for implementing progressive taxation policies. Resistance from those benefiting from the current system often stalls efforts, making progress difficult. Moreover, reducing inequality requires mechanisms that address inequality at its roots. Policies targeting education, competition, financial market regulation, and industrial development all hold the potential to create equitable economic opportunities, ensuring access to credit, job creation, and more-balanced economic growth. Despite facing unique, profound challenges, Africa is often overlooked in these global discussions. This book seeks to place the continent’s issues of income inequality, unequal access to education and health care, climate vulnerability, and inclusive growth at the center of the conversation. The book further advocates for innovative policies, including competition reforms and bargaining frameworks that shift the balance between capital and labor. Given that inequality in Africa is deeply rooted in historical, economic, and institutional factors, a stronger focus on pre-distribution policies is necessary. These systemic changes can help reshape the conditions under which inequality emerges and persists. In addition to policy reforms, it is vital to strengthen the research and academic infrastructure that underpins the understanding of inequality. Equity concerns must be addressed within the scientific field, and African research capabilities must be bolstered. This volume, written in collaboration with the African Center of Excellence for Inequality Research, calls for a greater focus on empowering African researchers as part of a broader development strategy. By doing so, it aligns with the World Bank’s and the Agence Française de Développement’s commitment to supporting research as a critical tool for sustainable development.