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PR, IFPRI4; ReSAKSS; 4 Transforming Agricultural and Rural Economies, AFR; DSGD, Ashift from agriculture to manufacturing was one of the hallmarks of job creation, poverty reduction, and rapid growth in low-income countries during the latter half of the 20th century. This experience in earlier decades of structural transformation was characterized by labor-absorbing, productivity-increasing manufacturing. Recent structural change in African countries has been markedly different—productivity gains are realized through reallocation of economic activity away from agriculture without the accompanying within-sector productivity growth in nonagriculture, and manufacturing in particular (Diao, McMillan, and Rodrik 2019; Diao et al., 2021; McMillan and Zeufack 2022). This chapter examines the extent to which agrifood processing follows these trends.

PR, IFPRI3; CRP2; 4 Transforming Agricultural and Rural Economies; ISI, DSGD; PIM, CGIAR Research Program on Policies, Institutions, and Markets (PIM)

PR, ISI; IFPRI3; CRP2, DSGD; PIM, CGIAR Research Program on Policies, Institutions, and Markets (PIM), We use plant level census data to identify spillovers from FDI in Ethiopia's manufacturing sector. Spillovers are identified by comparing changes in total factor productivity (TFP) among domestic plants in districts where a large greenfield foreign plant produces and districts where FDI in the same industry was licensed but not yet operational. Over the four years starting with the year of the FDI opening, the TFP of domestic plants is 11 percent higher in treated districts, employment in domestic plants increases and more domestic plants open. We describe mechanisms for knowledge diffusion using a plant level technology transfer survey. One third of Ethiopian plants are linked to FDI through labor sharing, supply chains and competition. Technology upgrading is most common as a reaction to competition in output markets and observation and imitation of FDI in the same line of business. Other benefits include enhanced managerial practices and knowledge about exporting.

Non-PR, IFPRI1; CRP2; 3 Building Inclusive and Efficient Markets, Trade Systems, and Food Industry, DSGD; PIM, CGIAR Research Program on Policies, Institutions, and Markets (PIM), We examine worker training by Chinese manufacturing firms using nationally representative firm-level data from both Ethiopia and Tanzania. While Chinese firms make up a relatively small portion of the manufacturing industry in both Ethiopia and Tanzania, at the firm-level they contribute significantly to both domestic employment and labor training. In both countries more than 85 percent of the workers employed by Chinese firms are local, and Chinese firms (and other foreign firms) are more likely to offer labor training than their domestic counterparts. However, we find evidence that Chinese firms underperform relative to other foreign firms in the share of local workers employed, and in Tanzania the difference is especially large for managerial positions.

Non-PR, IFPRI5; CRP2, DSGD; PIM, CGIAR Research Program on Policies, Institutions, and Markets (PIM)

Non-PR, IFPRI1; CRP2; 4 Transforming Agricultural and Rural Economies, DSGD; PIM, CGIAR Research Program on Policies, Institutions, and Markets (PIM), Recent growth accelerations in Africa are characterized by increasing productivity in agriculture, a declining share of the labor force employed in agriculture and declining productivity in modern sectors such as manufacturing. To shed light on this puzzle, we disaggregate firms in the manufacturing sector by size using two newly created panels of manufacturing firms, one for Tanzania covering 2008-2016 and one for Ethiopia covering 1996-2017. Our analysis reveals a dichotomy between larger firms that exhibit superior productivity performance but do not expand employment much, and small firms that absorb employment but do not experience any productivity growth. We suggest the poor employment performance of large firms is related to use of capital-intensive techniques associated with global trends in technology.