Ethiopia’s industrial activity has been characterized by meager growth for the last epochs. But recently the Ethiopian government endorsed Growth and Transformation Plan (GTP) which gives prime attention to selected industries. This study examines the likely effect of productivity expansion of labor intensive industrial activities on the macro economy, government priority industries, factor and household income and welfare of households. The sectors were selected from the Ethiopian 2009/10 SAM based on their production characteristics. The selected labor intensive sectors include dairy, grain milling, milling service, sugar refining, other food process, beverage, textile, leather product and wood products. In order to investigate the impact of a 10% increase in the technical coefficients of these labor intensive industrial activities, the study used the static stage computable general equilibrium (CGE) model. The recently updated 2009/10 Ethiopian SAM was used to calibrate important parameters of the CGE models.
The 2009/10 Ethiopian SAM revealed that 45.22% and 52.13% of rural and urban households generate their income from labor. The production expansion via an increase in their technical coefficient of the sectors derived significant change on macro variables such as real GDP, government consumption demand, investment demand, household consumption, export and import of goods and services. The GDP of the economy has been increased by 3.41%. The findings also suggest that production and export increase in government prioritized industrial products largely .For instance, the production of the textile and leather sectors increased by 26.08% and 41.03%,respectively.Increasing the production of labor intensive industrial activities showed significant decline of import of priority industrial goods. It also resulted in welfare gain to all rural and urban households. The study further extends its recommendation for Ethiopia to develop a strong industrial policy aimed towards promoting labor intensive industrial activities.
Table of Contents
CHAPTER ONE: INTRODUCTION
1.1. Background of the Study
1.2. Statement of the Problem
1.3. Objective of the Study
1.4. Scope and Limitation of the Study
1.5. Significance of the Study
1.6. Organization of the Paper
CHAPTER TWO: DESCRIPTION OF THE ETHIOPIAN ECONOMY
2.1. Economic Policy of Ethiopia
2.1.1. Imperial Regimes
2.1.2. The Dergue Regime (1974-91)
2.1.3. The EPRDF Regime (post-1991)
2.2. Characteristics of the Ethiopian Economy: SAM Based Analysis
CHAPTER THREE: LITERATURE REVIEW
3.1. Theoretical Review
3.1.1. Leontief /Input-Output Model
3.1.2. Computable General Equilibrium/CGE/
3.1.3. Armington
3.2. Empirical Literature
CHAPTER FOUR: MODELING
4.1. Stage CGE
4.1.1. Data Source
4.1.2. Activities Account
4.1.3. Commodities Account
4.1.4. Factors Account
4.1.5. Institutions Account
4.1.6. Trade/Price/ Block
4.1.7. Production and Trade Block
4.1.8. Institutional Block
4.1.9. System Constraint Block
4.2. Equivalent Variation
4.3. Model Closure and Scenarios
CHAPTER FIVE: SIMULATION RESULT
5.1. Calibration Procedures and Elasticities
5.2. The Effect of Increasing Efficiency of Labor Intensive Industrial Activities on the Macro Economy
5.3. The Effect of Increasing the Production of Labor Intensive Industrial Activities on Trade Balance of Priority Industrial Goods
5.4. The Impact of Efficiency Improvement of Labour Intensive Industrial Activities on Domestic Production of Priority Industrial Goods
5.5. Impact of Labor Intensive Industrial Activities on Factor Price and Demand
5.6. Impact of Labour Intensive Industrial Activities Efficiency Improvement on Welfare
CHAPTER SIX: CONCLUSIONS AND POLICY IMPLICATIONS
6.1. Conclusion
6.2. Policy Implications
Research Objectives and Key Themes
This study evaluates the macroeconomic and welfare impacts of increasing production efficiency in labor-intensive industrial sectors in Ethiopia, utilizing a static Computable General Equilibrium (CGE) model to analyze the implications of a 10% productivity increase within prioritized industries.
- Impact analysis of labor-intensive industrial productivity on real GDP and macro variables.
- Examination of income distribution effects across rural and urban household types.
- Assessment of trade balance improvements for government-prioritized industrial goods.
- Evaluation of shifts in factor demand and factor pricing resulting from industrial expansion.
- Formulation of evidence-based industrial policy recommendations for the Ethiopian economy.
Excerpt from the Book
4.1. Stage CGE
A stage model provides a richer treatment of factor markets and characterized by several unique features. First, by incorporating provision for non-traded exports and imports, competitive and non-competitive imports and exports, 1 it allows for a generalized treatment of trade relationships. Second, for those exported commodities that do not face perfectly elastic demand on the world market, relaxation of small country assumption is allowed. Third, the model allows for modeling of multiple product activities through an assumption of fixed proportions of commodity outputs by activities with commodities differentiated by the activities that produce them. Accordingly, the numbers of commodity and activity accounts are not necessarily the same. Fourth, valued added production technologies are specified as nested constant elasticity of substitution (CES). Fifth, Stone-Geary utility function is used to model household consumption expenditure.
It also has another feature that is it includes the generalized system of nested CES function for the representation of production, the endogenous modeling of unemployment for all factors through a regime switching mechanism and the ability for factors to migrate between regions/areas and or factor classification.
The model is designed for calibration using a reduced form of Social Accounting Matrix (SAM).
Summary of Chapters
CHAPTER ONE: INTRODUCTION: This chapter provides the background of the Ethiopian economy, states the research problem regarding industrial development, and defines the core objectives of the study.
CHAPTER TWO: DESCRIPTION OF THE ETHIOPIAN ECONOMY: This section reviews historical economic policies and analyzes the characteristics of the Ethiopian economy using a Social Accounting Matrix (SAM).
CHAPTER THREE: LITERATURE REVIEW: This chapter covers the theoretical foundations of Input-Output and CGE models and reviews relevant empirical literature on trade liberalization in Ethiopia.
CHAPTER FOUR: MODELING: This section details the methodology of the stage CGE model, including its mathematical structure and data source specifications.
CHAPTER FIVE: SIMULATION RESULT: This chapter presents the quantitative findings of the efficiency simulation, including effects on macro-economy, trade, production, and household welfare.
CHAPTER SIX: CONCLUSIONS AND POLICY IMPLICATIONS: This final chapter synthesizes the findings and provides strategic policy recommendations for promoting labor-intensive industrialization.
Keywords
Ethiopian Economy, Labor Intensive Industry, Computable General Equilibrium, CGE Model, Social Accounting Matrix, Industrial Policy, Export Promotion, Import Substitution, Household Welfare, Factor Demand, Macroeconomic Impact, Productivity Expansion, Trade Balance, Economic Development, Growth and Transformation Plan
Frequently Asked Questions
What is the core focus of this thesis?
The thesis explores the potential macroeconomic and welfare impacts of enhancing production efficiency within specific labor-intensive industrial sectors in Ethiopia.
Which sectors are highlighted as labor-intensive?
The study focuses on sectors identified from the 2009/10 SAM, including dairy, grain milling, milling services, sugar refining, food processing, beverage, textile, leather products, and wood products.
What is the primary objective of the research?
The primary objective is to assess how increasing the production of these labor-intensive industrial activities affects GDP, household income, and overall societal welfare in Ethiopia.
Which methodology is employed in the study?
The researcher uses a static stage Computable General Equilibrium (CGE) model, calibrated with the 2009/10 Ethiopian Social Accounting Matrix (SAM).
What does the main body of the work cover?
The main body discusses the theoretical and empirical literature, outlines the technical CGE modeling framework, and interprets the simulation results regarding macro indicators, trade balances, and household consumption.
Which keywords best characterize this work?
The work is characterized by terms such as Ethiopia, CGE modeling, labor-intensive industries, trade balance, household welfare, and industrial development policy.
How does the efficiency increase affect household income?
The study finds that increased industrial efficiency leads to higher factor demand and remuneration, generally increasing income for both rural and urban households, with significant gains noted for those involved in agricultural labor.
What does the model conclude regarding policy recommendations?
The author recommends that Ethiopia develop a strong industrial policy focused on labor-intensive sectors, complemented by supply-side interventions and technological upgrades in the agricultural sector.
- Arbeit zitieren
- Menberu Atalele (Autor:in), 2017, The Impact of Production Expansion of Labor Intensive Industrial Activities on the Ethiopian Economy, München, GRIN Verlag, https://www.grin.com/document/358841
