State Control and Manufacturing Labor Productivity in Ethiopia

The manufacturing sector in Ethiopia has experienced a decline in productivity since the revolution. The causes are related to the economic dislocation caused by war and internal strife as well as to nationalization and other policies of Ethiopian socialism that have largely excluded the private sector. This study analyses the productivity of the manufacturing sector by econometrically testing the structural change in the manufacturing production function between the periods 1960-1974 and 1975-1984. Factor productivity estimates are also made to determine if the hypothesized structural change has had an impact on labour productivity. Following a discussion of trends in the development of the manufacturing sector of Ethiopia and of the models, methodology and data used in the analysis, two sets of analyses are performed. Test results support the hypothesis that there was a structural change in the manufacturing production following the 1974 revolution. As for labour productivity, even though the productivity of labour declined after the revolution, the government maintained its policy of increasing the supply of industrial labour. Notes, ref.