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Journal of Business Economics and Management  Science

Available online at

Vol.1(1), pp.1-8, December  2014

Article ID: jbems/14/011

© 2014 Journal Dynamics



Original Research Paper

Impacts of Manufacturing Sector on Economic Growth in Ethiopia: A Kaldorian Approach

Teshome Adugna

Department of Development Economics, Ethiopia Civil Service University, Ethiopia.

*Corresponding author.

Received 1 September, 2014; Accepted 19 November, 2014.


Manufacturing sector play a major role in achieving economic growth in developing and developed countries. The purpose of this article is to see the impact of manufacturing sector on economic growth in Ethiopia based on Kaldorian approach. The study used secondary data collected from different sources: Central Statistical Agency (CSA), National Bank of Ethiopia (NBE) and Ministry of Finance and Economic Development (MOFED). The study period covered was between 1980 and 2009.The study applied both descriptive and econometric methods of analysis. The outcome revealed that the manufacturing sector output in the country increased from Birr 2.2 Billion to Birr 42 Billion in 2009. The sector output annually has increased annually by 50 percent between 2002 and 2009 as compared to 13 percent before 2002. In the same period, the number of manufacturing establishments increased from 408 to 2,172 which have showed additional 1700 new manufacturing firms during the last three decades. Furthermore, the employment opportunity by the sector increased from 79 thousand to 186 thousand during the study period. The sector has also shown a significant change in structure, ownership and characteristics during the last ten years (2002-2009). Such change in the manufacturing sector affects the economic growth and productivity of other sectors. During these years (Between 2002 and 2009), the country has experienced stable and broad based economic growth. The model estimation indicates that a unit percent change in the manufacturing sector increase economic growth by 24 percent in the country. In addition to this, the manufacturing sector significantly affects the labor productivity. The absence of selective government policy and poor competitive advantage of the sector in the international market have been strongly affecting the impact of the sector on national economy.

Key words: Ethiopia, Manufacturing Sector, Economic growth and Kaldor’s law.