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The Effect of Improved Productivity of the Manufacturing Industries on the Ethiopian Economy: A Computable General Equilibrium (CGE) Analysis


Ethiopia’s manufacturing industry is at the onset of development though there are recent upsurges in the number of firms. This study examines the effect of productivity improvement of the manufacturing sector on the macro economy, sectoral output, factor and household income and welfare of households. In order to investigate this, the study utilized the recursive dynamic computable general equilibrium (CGE) model. The recently updated 2005/06 Ethiopian SAM was used to calibrate the CGE framework. Three policy simulations of high, medium and low TFP growth rates were simulated on agro processing, non-agro processing and overall manufacturing activities. The study demonstrated that the manufacturing sector is a key driver of economic growth in particular; the findings suggest that productivity increase in agro processing, non-agro processing and overall manufacturing sector largely increases real GDP and sectoral outputs. Moreover, both rural and urban households are well-off in all the policy simulations. The study further extends its recommendation for Ethiopia to develop a strong industrial policy aimed towards promoting both agro and non-agro processing industries.

Corporate Author: 
Ethiopian Economic Association (EEA)
Ethiopian Economic Association (EEA)
Primary Descriptors: 

Industries - Ethiopia

Secondary Descriptor: 

Small busnesses

Geographic Descriptors: 
Cataloge Date: 
Broad Subject heading: 
Manufacturing industries - Ethiopia
Call Number: 
330.05 ETH JOU
Serial Key Title: 
Ethiopian Journal of Economics
Publication catagory: 
Content type: 
April, 2013
Publication date: 
2014-11-03 00:00:00
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Serial (Journal)
Current frequency: