M. Freire, S. Lall, and D. Leipziger
This chapter examines Africa’s urbanization and the challenges and opportunities it presents, with emphasis on what it will take to make African cities efficient, sustainable, and inclusive. Using economic geography as an organizing framework, it proposes policies that not only support agglomeration benefits but also manage congestion costs. The discussion begins by sketching key elements of African urbanization (heterogeneity, income levels, capital investment, etc.) followed by a review of recent literature on urban growth models and how they apply to Africa’s urbanization process. It then considers what should be done to encourage efficient and inclusive African cities, while taking into account the diversity of countries as well as the continent’s geographical and social division.
Bart Minten PhD, Thomas Reardon, and Seneshaw Tamru
Ethiopia’s agricultural markets are quickly evolving, driven by major contextual changes including high population growth, rapid urbanization, major infrastructure investments, income growth, diet change, and policy reform. Agricultural supply chains are rapidly growing, and they are an increasing source of employment in the country. Agricultural markets are found to be better integrated and marketing margins and seasonal price amplitudes to have become smaller over time, but we also see an increase in prices of nutritious high-value foods, and this is in contrast to staple cereal prices. Although food imports and the number of food aid beneficiaries have not reduced over time, Ethiopia remained a net agricultural exporter, in value terms, for all but one year in the decade before this study, illustrating at the national level the relatively good performance of the agricultural sector.
Stefan Dercon and Douglas Gollin
This chapter discusses the role agriculture has played in growth and economic transformation in Ethiopia since the 1990s. Ethiopia’s dominant development strategy narrative since the 1990s has been Agricultural Development-Industrialization (ADLI), which takes its inspiration from dual-economy models of linkages between sectors. We use the theoretical perspectives of these models and of ADLI to discuss progress in growth and poverty in this period. We find that ADLI offered a plausible and seemingly successful strategy for Ethiopia at an earlier stage of its growth and transformation, but it has serious limitations. In more recent years there appears to have been more emphasis on urban and industrial growth and this may also have the potential to boost value added and labour productivity in agriculture—reversing the sectoral dynamics of the ADLI approach. Looking forward, we posit that to make further progress in agriculture, there is a need to acknowledge and facilitate the transmission of urban and international demand, thereby encouraging higher-value crops and higher value addition.
This chapter examines the role that public policy initiatives—specifically anti-poverty transfers—have played in the reduction of poverty and inequality in Brazil. A number of anti-poverty initiatives are considered in turn, and not just the widely known Bolsa Familia conditional cash transfer program. The analysis establishes that such transfers—including conditional cash transfers—have proved surprisingly effective, even helping to tackle long-standing income inequality. It is recognized that explicit anti-poverty initiatives were not the only drivers of the reduced incidence of poverty and inequality: factors such as growth and improved access to labor markets also played a role. However, progress is now threatened by the recent economic and political crisis.
Rural Ethiopians who lack access to a few basic (non-food) wage goods are defined as ‘most deprived’. Like many other extremely vulnerable Africans, they derive little benefit from donor and government policies claiming to reduce poverty. They may continue to be ignored if underfunded official statistical agencies publish reports that do not accurately reflect their experience, or if the impact of policy interventions on the bottom 10 per cent can be obscured by fashionably complex indices of poverty. A case is made here for more rigorous statistical monitoring of rural real wages; and for prioritizing investments that improve the employment prospects of women dependent on agricultural wage labour. It is argued that a low-cost Simple Deprivation Index can identify poorly educated agricultural wage labourers as members of the ‘most deprived’ households. These households also contain children who are at risk from the cumulative consequences of inadequate nutrition and schooling.
Geraldo B. Martha Jr. and Eliseu Alves
Brazilian agriculture reinvented itself by targeting a science-based approach. Embrapa, the research arm of the Brazilian Ministry of Agriculture, is recognized as key in this process. A set of characteristics—public corporation model; scale of operation at national level; spatial decentralization; specialized research units; strong focus in human capital; a vision of an agriculture based on science and technology—explains Embrapa’s strength and achievements. Looking ahead, agricultural production needs to increase at least at the same pace of demand. Otherwise, prices will increase, and the poor will suffer the greatest impact. One of the greatest barriers to ensure modern technology will be more broadly and effectively adopted is market imperfection, which alters relative prices and the returns to investment in technologies. Reducing market imperfections is a necessary condition for expanding production in a more inclusive way, and to increase the effectiveness of policies targeting technology adoption by farmers.
Luiz Ricardo Cavalcante
This chapter discusses the role played by the Brazilian Development Bank (BNDES) based upon a survey of its costs and benefits reported in the literature. It provides some theoretical background for the creation and the existence of development banks, using this background to support a brief discussion about the long-term context that marked the bank’s evolution as well as the contemporary issues concerning its role in the Brazilian economy. The author argues that a national development bank such as the BNDES contributes to increasing capital formation, as it provides credit at more favorable conditions to selected projects. However, the author also argues that the presence of the BNDES loans forces the Central Bank to raise interest rates to a level that otherwise would be lower.
Carlos Oya PhD
This chapter provides an overview of the factors and dynamics involved in the creation and formation of an industrial workforce in an agrarian-based economy. The main argument is that the process of building an industrial working class is uneven, protracted, and requires interventions and important economic and social shifts over long periods of time. Historical lessons of early and late industrializers are highly relevant for contemporary Ethiopia as it seems that history does repeat itself in some ways. The chapter focuses on a number of structural obstacles to the process of building an industrial workforce, particularly: addressing socio-cultural barriers and the problem of ‘work cultures’ and work ethic; sourcing workers, managing and especially housing migrant labour; scarcity of employable skills (including soft skills); mismatch in expectations between employers and workers, largely related to wage-setting mechanisms, non-wage conditions, and labour productivity.
Jenna Golan, Derek Headey PhD, Kalle Hirvonen, and John Hoddinott
In the 1980s and 1990s Ethiopia was synonymous with famine and had one of the highest rates of chronic child under-nutrition in the world. From around the turn of the millennium, however, anthropometric measures of nutrition have improved substantially. Among children 0–5 years, the prevalence of stunting—a measure of chronic under-nutrition—fell from 58 per cent in 2000 to 38 per cent in 2016. In this chapter, we carefully document how stunting rates have changed by gender, and across space and wealth strata. We then use insights from the nutrition literature to understand the possible underlying drivers of this rapid reduction in stunting prevalence. This analysis suggests that the fall in stunting over this period was driven by improvements in exclusive breastfeeding practices. Meanwhile, poor maternal health during pregnancy, and poor dietary diversity during complementary feeding remain significant risk factors for stunting.
Ha-Joon Chang and Jostein Hauge
Ethiopia’s rapid economic growth over the past decade, state intervention in the economy, and focus on industrialization are prompting characterizations of Ethiopia as a developmental state. This chapter discusses the concept of a developmental state in Ethiopia with reference to the East Asian developmental state model. It suggests that the Ethiopian state draws inspiration from the East Asian developmental state model in many ways. There is a strong ‘East Asian’ intellectual influence on prominent political figures in Ethiopia, the Ethiopian state intervenes heavily in the market, and it has a strong developmental vision to be achieved through industrialization. However, in other ways, the Ethiopian development model differs from the East Asian developmental state model. Public support for the state’s development project is somewhat fragile and fragmented, and the Ethiopian bureaucracy does not have much power or independence from the ruling party.
Ayelech T. Melese
The abilities of domestic firms to expand their business into high-productivity sectors and the effects of employment in productive industries are regarded as a challenge to Ethiopia’s structural transformation efforts. The experience of the Ethiopian floriculture industry shows that many domestic firms collapsed after an early burst of firm creation. Fifteen remaining firms, with varying capability levels, appear to be struggling to expand their business and to move up the technological ladder. This chapter identifies the major areas where the domestic firms lack capability and the factors that are weakening them, including the high labour turnover prevalent across the sector. The sector has created widespread employment, predominantly for women, but its impact on worker well-being is limited. These factors imply a weak contribution by the sector to the virtuous cycle of investment, productivity, and employment that is needed to expand productive capabilities, reduce poverty, and challenge gender inequality.
Claudio de Moura Castro
This chapter examines the evolution of education in Brazil over the long term. It is established that historical circumstances allied to successive policy failures help account for Brazil’s disappointing performance in the educational field in international comparative terms. In 1920, the system covered 9% of school-age children, 26% by 1950 and, more recently, 98% of 6–14-year-old children have been covered. The acceleration in growth, particularly since the 1950s, has been an impressive achievement. The latest records indicate that 71% of the relevant age cohort finishes basic education. Secondary education is completed by 51%. Compared to the past, this is quite an achievement. Compared to world or even Latin American standards, these results are mediocre at best. The available tests indicate weak performance. The chapter highlights the kinds of issues that will need to be addressed if this situation is to be tackled adequately.
Deborah Johnston PhD and Helen Walls
Ethiopia has an integrated approach to addressing nutrition. However, greater clarity is needed on the wider impact of policy on food and nutrition. We focus on the interrelationship between economic policy and nutrition policy (defined as including all food- and nutrition-relevant policy). While Ethiopia’s policy has had notable successes, particularly with addressing stunting, two key challenges remain. First, some indicators such as wasting and anaemia in children under five have shown far less improvement. Second, the bottom quintile of children has seen far more limited general improvement than the population as a whole. We argue that the focus of government policy needs to shift from food availability to broader issues of food acquisition and particularly food affordability, which is mediated through food prices and waged employment. Of particular concern is the rising price of animal-source products and other non-staple foods, which may be related to the challenges of addressing some nutritional indicators.
Mekonnen Manyazewal and Admasu Shiferaw PhD
Ethiopia has advanced from the strong economic recovery of the 1990s to rapid growth since the early 2000s. The underlying economic structure exhibits only modest changes as industrialization has yet to take root. This chapter examines the link between policy choices, economic growth, and transformation under the Derg and EPRDF regimes. While policy reforms and public expenditure on infrastructure and basic services since 1991 have triggered rapid growth by reducing major inefficiencies, structural transformation requires action to boost productivity, alter the structure of demand, and build productive capacity. Productivity remains below that of other developing countries both in the production of food and agricultural raw materials. Manufacturing firms exhibit lacklustre levels of investment while import penetration rates continue to rise. Inequality of asset ownership in urban areas, and the weak response of asset positions to income growth in rural areas suggest challenges in raising household demand for non-food consumption items.
Zinabu Samaro Rekiso
This chapter critically examines the major achievements and challenges of the education sector in Ethiopia between 1991 and 2017 from the perspective of long-term economic development and structural transformation. The chapter finds that Ethiopia has achieved enormous success in terms of increasing access to all levels of education throughout the country but the achievement has been at the cost of a vicious cycle of low education quality. In addition, the chapter argues that failure to significantly change the productive structure of the economy has resulted in persistently high levels of unemployment, underemployment, and brain drain of the better-educated human resources of the country. The chapter concludes that there is a need for synergistic, dynamic, context-specific, and comprehensive policies and strategies aimed at progressively moving the Ethiopian economy away from its current specialization in nature-intensive, low-skill, low-knowledge, low-technology economic activities towards ‘mind-intensive’, higher-skill, and technology-intensive economic activities.
Entrepreneurship and Sustainable Development: The Relevance of Shaping Intertemporal Local Intangible Conditions
Inaki Pena-Legazkue, Maribel Guerrero, and José L. Gonzalez-Pernía
There is an ongoing debate in the literature about the complex linkage between entrepreneurship and economic development. The relationship seems to be ambiguous, complex, and in most cases, with long-run effects and externalities. This chapter is an attempt to disentangle some of the most salient invisible factors that help in shaping the local conditions for entrepreneurship and prosperity. A good understanding of the historical trajectory of a region (i.e., time), the construction of a locally embedded social capital (i.e., space), and the ability to monitor and react to changes in entrepreneurial activity (i.e., monitoring of the performance of the local ecosystem) are important conditions based on intangible elements (i.e., trust, culture, commitment, capacity for social cohesion, a shared-strategic vision for the territory, . . .) that enrich regional core competences to shape entrepreneurship, which in turn, will lead to sustainable economic development.
Fantu Cheru and Zinabu Samaro Rekiso
Sixteen years ago the government of Ethiopia adopted the 2002 Foreign Affairs and National Security Policy, which emphasized ‘economic diplomacy’ as the cornerstone of its foreign policy. A central component of the strategy has been regional integration with Ethiopia’s neighbours in the Horn and Eastern Africa. Since then the political contexts have changed dramatically. Ethiopia is now seen as an attractive destination for labour-intensive manufacturing and the government continues to invest in mega infrastructure and power generation projects to drive its industrial ambition. However, the Ethiopian state faces a storm of internal and external threats that could undermine its ambitious programme of economic transformation and regional integration. This chapter assesses the extent to which the emphasis on ‘economic diplomacy’ has helped the government achieve its goals of economic development, regional integration, and peace and stability in a region where state weakness, poor governance, and vulnerability to external pressures are endemic.
Assefa Hailemariam PhD
Ethiopia is the second most populous country in Africa. Although it is the fastest-growing economy in Africa, it is also one of the poorest and least urbanized. Recently, the country has been undergoing demographic changes of historic proportions. It has been experiencing rapid declines in fertility, in infant, child, and maternal mortality, and an increase in life expectancy. Currently, the country is going through a demographic transition process. Both the size and the age structure of the population are changing. Understanding these changes is vital as the country plans the pathway for its future development. This contribution uses rigorously generated evidence of Ethiopia’s demographic transition to highlight the changes in population dynamics that have occurred in the country in the last sixty years and to examine the main drivers of these changes and their implications for the country’s future.
Belachew Mekuria Fikre PhD and Menberetsehai Tadesse PhD
Though one of the key organizing principles that underpin the current constitution is the creation of a single economic community, the country’s long history of legal transplantation does not necessarily complement this aspiration. This chapter examines how the state-managed developmental enterprise continuously negotiates with the rather ‘foreign’ legal elements, usually to the former’s detriment. The chapter takes a closer look at some of the key elements of the constitution and legal institutions vital for economic growth. Ethiopia’s federal state system together with the developmental state approach can only positively contribute to the creation of a single economic community when some of the key areas in the country’s legal development are revisited to align with its economic development model. The various areas examined in this work demonstrate the dilemmas faced when using law as instrument to achieve economic progress under the developmental state policy of the government in power.
At the end of the nineteenth century, Ethiopia had a traditional economy dependent on ox-plough agriculture and crafts. Goods and services were exchanged through the barter system. This changed from the 1890s onwards with modern innovations such as the railway, telephone and telegraph, banking, and a national currency. In the first four decades of the twentieth century, import/export trade expanded, elementary education spread, new towns emerged, and manufacturing enterprises were born. Italian occupation of the country (1936–41) helped push forward the monetization of the economy. In the three decades after liberation (1940s–1960s), advances were made in the development of the services, manufacturing, and financial sectors. Basic education was expanded, and the government adopted a series of development plans to guide the process of economic and social development. The principle of disciplined state planning to transform the economy has continued under the EPRDF although the task remains incomplete.