This paper investigates whether the Ethiopian economy is undergoing a virtuous process of structural change. In particular, it assesses the relative contributions of within-sector and between-sector productivity to output per capita growth. Based on data disaggregated into eight sectors for the period 1996–2011, the analysis suggests that the structure of output has changed considerably—predominantly from agriculture to services—but changes in the composition of employment have lagged behind. Labour productivity growth has been strong across most sectors, albeit mainly driven by within-sector productivity improvements. Nonetheless, the pace of structural change is accelerating and its relative contribution to output growth is increasing.

Pedro Martins