Industrial Policy, Industrialization, Export Diversification and Economic Development: The Case of Ethiopia
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Ethiopia experienced a transition into the market-based system in 1992. It recorded a rapid economic growth since the mid-2000s. Analyzing the case of Ethiopia, this paper tries to reveal whether or not sticking to specialization based on the pattern of comparative advantage is preferred to industrialization and diversification. The share of agriculture in GDP continued to fall, while that of the manufacturing sector rose. Ethiopia’s rapid economic growth can be attributed to the combination of the market-based reform and the active industrial policy. The government has promoted the agro-processing industry and selected labor-intensive industries in the manufacturing sector. It provided them infrastructure, tax incentives, and industrial zones. It has pursued export promotion policy. Ethiopia succeeded in export diversification from a heavy reliance on coffee to other agricultural products and manufactured products. The case of Ethiopia provides policy implications to many developing countries. Among others, the Ethiopian government pursued an export-led economic growth and an industrialization strategy, which led to industrialization and export diversification.
Abstract
Ethiopia experienced a transition into the market-based system in 1992. It recorded a rapid economic growth since the mid-2000s. Analyzing the case of Ethiopia, this paper tries to reveal whether or not sticking to specialization based on the pattern of comparative advantage is preferred to industrialization and diversification. The share of agriculture in GDP continued to fall, while that of the manufacturing sector rose. Ethiopia’s rapid economic growth can be attributed to the combination of the market-based reform and the active industrial policy. The government has promoted the agro-processing industry and selected labor-intensive industries in the manufacturing sector. It provided them infrastructure, tax incentives, and industrial zones. It has pursued export promotion policy. Ethiopia succeeded in export diversification from a heavy reliance on coffee to other agricultural products and manufactured products. The case of Ethiopia provides policy implications to many developing countries. Among others, the Ethiopian government pursued an export-led economic growth and an industrialization strategy, which led to industrialization and export diversification.
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