How Do Cities in Ethiopia Create Jobs?

Abstract

This paper reviews city-based industrialization across Ethiopia to understand (a) its importance in driving net job creation, and (b) the factors that determine the success of high-growth industries and cities. The focus of the analysis is on firms, industries, and cities in Ethiopia that create and sustain jobs. The analysis finds that much of new job creation is found in emerging cities, although capital intensity in production is also increasing. As in other countries, 97 percent of new jobs are created by large firms, and it is incumbents and not new entrants that contribute to initial and sustained increases in employment. Agglomeration economies, better business environment, and access to better infrastructure are factors that matter, albeit differently, depending on firms' size, life-cycle, and rate of growth.