AGRICULTURAL DEVELOPMENT LED INDUSTRIALIZATION IN ETHIOPIA: STRUCTURAL BREAK ANALYSIS

Abstract

The Ethiopian economy is heavily dependent on agriculture. Unlike other emerging African countries, Ethiopian economic growth is driven mostly by public investments in infrastructure and agricultural productivity improvement. However, the performance of agriculture was not satisfactory as poverty remained. Lack of appropriate policies and strategies was considered as the ultimate reason for the sector’s past stagnation. Consequently, to solve this problem and promote agricultural and economic growth, government a national development strategy called Agricultural Development Led Industrialization (ADLI). While, ADLI argues for a mutually re-enforcing transformation of agriculture and industry, the primary goal of ADLI was to alleviate absolute poverty.  The strategy was also complemented by different plans so as to empower industrial sector in addition to agriculture. Therefore, ADLI policy’s effectiveness was tested with Structural Break Analysis. The results showed that there was structural break in economic growth in 2004, indicating a higher and steady growth afterwards. The descriptive results also showed that agricultural sector remained the dominant contributor to the GDP growth of the country with only recently that the service sector is outperforming agricultural sector. The contribution of the industrial sector remained low, even though recently it started performing well.

Keywords

• ADLI,Structural Break,Zivot-Andrew,Bai-Perron,Ethioppia

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