Structural Change and Economic Growth in Ethiopia, 1991-2017

Abstract

Ethiopia undertook far-reaching economic reforms since 1991. For the past three decades, its economy has exhibited a structural change both in terms of sectoral share of employment and their contribution to GDP. For 1991- 2017, the contribution of the agriculture sector to GDP has declined from 58.7% to 33.8% and its share to total employment from 90.1% to 68.22%. Similarly, the value-added contribution of the service sector has increased from 29.6% to 37% and its share of employment from 16% to 21.5% while the contribution of manufacturing sector to GDP remain stagnant. Therefore, this study determines whether the change in the production structure of the country affects the GDP growth rate of the country. As a result, the structural change increases GDP growth rate both in the short run and long run through the relocation of labor mainly from the agriculture and manufacturing sectors to the service sector.