Industrial policy measure and economic structure in Ethiopia: the case of Oromia region

Abstract

The industrial policy measure is an engine for the acceleration of structural transformation in the economy. The structural transformation in the economy is achieved by increasing the share of output, total employment and resource productivity in industry and decreasing the share of the total employment in agriculture. This study measures the effects of industrial policy measure on structural transformation of the economy of the Oromia region. This analysis is on a basis of the surveys of Central Statistical Agency of Ethiopia, Oromia Finance and Economic Development Bureau, Ministry of Finance and Economic Development and other institutions. Computable General Equilibrium models, which are on a basis of Social Accounting Matrix, are applied to evaluate the effects of industrial policy measure on structural transformation. The finding indicates that the value-added share of agriculture decreases from 69.09 to 60.72%. The intervention increases the value-added share of the industrial sector from 9.42 to 15.63% in the regional economy. It decreases the share of agricultural commodities in exports and increases the share of industrial products in exports. The finding advises government to implement industrial policy measure to reduce the share of agriculture in total employment, indicating economic growth.