Urbanization Without Industrialization: The Case of Ethiopia

Urbanization in Ethiopia has proceeded at a pace that is difficult to reconcile with the structure of its economy. Over the past two decades, the country has experienced one of the fastest rates of urban growth in the world. The urban share of the population rose to 24 percent by 2024. This expansion has not been matched by a commensurate transformation of the productive base. The result is a pattern that development economists increasingly describe as urbanization without industrialization.

Historically, industrialization in Ethiopia has been shallow and uneven. Manufacturing, which plays a central role in absorbing labor during early development in countries that industrialized successfully, has long remained marginal. Even during periods of relative growth, such as the late imperial and early Derg eras, manufacturing accounted for less than 5 percent of GDP and employed a very small share of the workforce. More recent data show little structural break from this pattern. Manufacturing contributed around 7.3 percent of GDP at its peak in the 1990s and has since declined to roughly 4 percent in recent years. In employment terms, the sector remains even smaller, accounting for about 5 percent of total employment as of 2020.