## 44710-afrdp

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### Contributors and scope
- Paper prepared by Louise Fox, Alun Thomas, and Cleary Haines.
- Acknowledged comments from conference participants in Nairobi and Zambia, Axel Schimmelpfenning, and the African Department’s Research Advisory Group.
- Authors state: "All remaining errors are our own."
- Objective: provide the most complete analysis of structural transformation among low- and low-middle-income countries in sub-Saharan Africa.
- Coverage: analysis covers over 30 countries (countries included as part of sub-Saharan Africa are shown in Appendix Table 1).
- Comparison: contrasts sub-Saharan Africa experience with selected fast-growing low-income Asian economies (Bangladesh, Cambodia, Vietnam).
- Timeframes emphasized: 1990s through 2010 and projections to 2020.

### Key concepts and theoretical framing
- Structural transformation requires:
  - (1) shift of GDP out of agriculture into modern industrial and service enterprises, and
  - (2) a follow-on shift in employment out of agriculture into nonagricultural enterprises, which involves migration and urbanization.
- Demographic transition (lower dependents and slower labor force growth) typically facilitates structural transformation.
- Cited theoretical perspectives:
  - Lewis (1954).
  - Rodrik (2015).
  - Duarte and Restuccia (2010).
  - McMillan and others (2014).
  - Amirapu and Subramanian (2015).

### Main empirical findings — growth, output structure, and employment
- Growth performance:
  - Sub-Saharan Africa experienced one of its best decades of growth in the past decade.
  - Economic growth averaged about 4 percent per annum among upper-middle-income countries and about 6 percent per annum among low-income sub-Saharan African countries.
  - These growth rates surpass those of middle- and low-income Asia over the same period.
  - During the recent financial crisis, growth among low-income countries (LICs) in sub-Saharan Africa was broadly unaffected, in contrast to a sharp downturn among LICs in Asia.
- Output structure changes:
  - Agriculture declined as a share of GDP across the continent despite increases in agricultural commodity prices that pushed up the share in current prices.
  - The share of higher-productivity sectors increased as a share of GDP (Regional Economic Outlook Fall 2012).
  - In both LICs and low-middle-income countries (LMICs), agriculture fell as a share of GDP by about 8 percentage points combined with a corresponding rise in services.
  - Aggregate industry share remained fairly flat.
  - Manufacturing represents only about 7 percent of output in low-income sub-Saharan African countries.
- Employment and productivity dynamics (2000−10):
  - Structural transformation occurred in some sub-Saharan African countries during 2000−10, with convergence in sector productivities within countries.
  - Change was driven by strong movement of labor and output out of agriculture into services rather than into industry.
  - Movement lowered relative productivity in services, in part because much of the movement was into lower-productivity nonwage employment.
  - Sluggish demographic transition in sub-Saharan Africa, which swelled the labor force, played a major role in limiting industrial employment expansion.

### Comparative findings with fast-growing Asian LICs
- Asian comparators: Bangladesh, Cambodia, Vietnam.
- Key contrasts:
  - Bangladesh, Cambodia, Vietnam experienced much faster shifts of output and employment into industry.
  - East Asia saw employment share in industry grow rapidly through expansion of manufacturing wage employment.
  - Industrial expansion was labor intensive such that average labor productivity in industry declined relative to the economy-wide average.
  - Low labor force growth in these Asian countries meant less labor for the economy to absorb, aiding structural transformation.

### Demographics and labor force indicators
- Labor force growth rates, 2000–2010:
  - east Asia: 1.2 percent per annum
  - south Asia: 1.7 percent per annum
  - sub-Saharan Africa: 2.6 percent per annum
- Median age:
  - sub-Saharan Africa: 18
- Working-age population projection:
  - Between 2005 and 2020 the working-age population is projected to increase by over 200 million people.
- Fertility trend:
  - Africa’s fertility rate is falling much more slowly than the rate previously observed in Asia and Latin America in the 1970s (Filmer and Fox 2014).

### Employment categories and informality
- Employment categories used:
  - Agricultural employment: predominantly smallholder farmers; includes wage work in agriculture, fishing, primary forestry.
  - Household enterprise (HE) employment: unincorporated, nonfarm, household-owned businesses (self-employed owners, family members).
  - Wage employment (industry or services): paid labor outside agriculture; includes public and private sectors.
  - Unemployed: labor force participants not in employment per the paper’s broad definition.
- Informality statistics:
  - The vast majority (70 percent) of nonfarm enterprises today are pure self-employment—just the owner operating the HE.
  - About 20 percent of these enterprises include a family member.
  - Only 10 percent have hired someone outside of the family.
  - Taken together, 80 percent of the labor force in 2010 was in household farms and firms (the “informal sector”).
- Wage employment:
  - By 2010, roughly 15 percent of the labor force in sub-Saharan Africa was in the wage sector.
  - Of that wage-sector employment, most were found in the services sector.
  - Using a subset of countries, it was estimated that in the LICs and LMICs, about half of all nonfarm wage employment was in formal jobs.

### Sectoral employment patterns and country comparisons
- Agricultural share of employment remains high in sub-Saharan Africa; labor is more concentrated in the HE sector in LMICs in sub-Saharan Africa.
- Comparator Asian countries have a larger share of employment in industrial wage jobs due to high manufacturing employment.
- Resource-rich sub-Saharan African countries:
  - Have not created much private wage employment.
  - Majority of wage employment is in the public sector.
  - High resource rents can create an economic structure unfriendly to private sector labor-intensive industry (Filmer and Fox 2014).
- Regional employment distribution, 2010 (labels on Figure 4): 183 million, 40 million, 150 million, 21 million, 395 million.
- Comparative country-level employment snapshot (Table 1 rows as presented) — entries preserved exactly:
  - Low-income
    - Sub-Saharan Africa: 13.3  2.610.718.268.5100.0
    - Lao P.D.R.: 13.5  5.4  8.119.067.5100.0
    - Bangladesh: 25.710.814.927.746.6100.0
    - Cambodia: 23.311.112.221.055.7100.0
  - Low-middle-income
    - Sub-Saharan Africa: 13.4  1.811.629.157.5100.0
    - Vietnam: 31.814.317.519.149.1100.0

### Projected output, employment, and productivity through 2020
- Output and sector projections:
  - Continued strong growth across country groups.
  - Sharp decline in agricultural output share for all except resource-rich countries.
  - Resource-rich and lower-income countries projected to maintain recent growth patterns of above 6 percent per annum.
  - Industrial sector projected to grow at 7 percent per annum in low- and low-middle-income countries.
  - In resource-rich countries, service sector projected to grow very rapidly, with agriculture remaining fairly stable.
- Employment projections (summary from Figure 13 and discussion):
  - Little change from current structure; agricultural sector remains important for employment.
  - Industrial wage jobs share rises only from 2.3 to 3.2 percent of total employment in LICs and LMICs.
  - Household enterprises projected to rise by 4 percentage points to 22 percent of employment in LICs.
  - Many new jobs projected in low-income countries such as Democratic Republic of the Congo and Ethiopia; agricultural sector remains important for employment.
- Median labor productivity growth for LICs over 2010–20:
  - Projected median: 2 percent per annum.
  - Country variation: low of 1 percent per annum for Benin, Mali, and Senegal; about 4 percent per annum for Rwanda and Sierra Leone.
- Shapley decomposition of aggregate labor productivity change over 2010–20:
  - About 63 percent of expected average productivity change accounted for by within-sector productivity changes.
  - About 37 percent accounted for by movements across sectors (employment reallocation).
  - Contrast: MR estimate for east Asia (1990–2005) found between-sector movements accounted for only 15 percent of total productivity gain (aggregate 3.9 percent per annum).

### Productivity transformation mechanisms and constraints
- Structural transformation raises average labor productivity via:
  - Within-sector productivity gains.
  - Reallocation of workers from low-productivity to higher-productivity activities.
- Sector productivity ordering historically: agriculture lowest, services middle, industry highest (Bah 2013; McMillan and others 2014).
- Evidence:
  - Manufacturing productivity in Africa has deteriorated slightly relative to the United States since 1990; for Asian countries the long-term trend has been flat (de Vries, Timmer, and de Vries 2015).
  - For selected sub-Saharan African countries (2000–10), industry productivity is generally above other sectors (Zambia an exception), but employment share shifted little into industry.
  - Employment has predominantly shifted out of agriculture into services; services expansion largely reflects lower-productivity self-employment growth.
- Limits to manufacturing-led transformation:
  - Rodrik (2015) suggests manufacturing employment share peaks at about 15–18 percent of total employment; no low- or low-middle-income sub-Saharan African country approaches that level—most are below 5 percent.
  - Even with optimistic output growth, employment absorption in nonagricultural sectors will mainly occur in services (notably household enterprises) and nontradables industrial sector (construction, utilities), not primarily in manufacturing.

### Policy-relevant implications and recommendations
- To continue strong growth into the next decade, sub-Saharan Africa must:
  - Attract private investment needed to grow the manufacturing sector.
  - Strengthen efforts to raise within-sector productivity across agriculture, industry, and services.
- Demographic and savings dynamics imply policy focus should include:
  - Policies that raise private savings and investment capacity despite high dependency ratios.
  - Policies to increase labor absorption capacity per unit of investment, recognizing faster labor force growth relative to Asian comparators.
- Agricultural potential:
  - If African agriculture realizes its potential, agricultural jobs could become more productive and higher-earning, alleviating part of the employment challenge.
- Strategic choices:
  - Ensure labor reallocation from agriculture goes to sectors (services or manufacturing) that generate substantially higher value added per worker.
  - Prioritize policies that either enhance productivity and value addition of services absorbing labor or revive/support a greater role for manufacturing employment.

### Conclusion — prospects and open questions
- It is possible for sub-Saharan Africa to develop a growth pattern that transforms the economy more rapidly if movement from agriculture into services can generate large improvements in value addition.
- Benchmarking against east Asia shows sub-Saharan Africa falls short in terms of manufacturing employment development.
- It remains an open question whether a services-led transition with limited manufacturing can deliver the pace and scale of productivity gains required for rapid transformation.
- Core analytical insight: faster transformation requires not just shifting labor out of agriculture but ensuring the destinations deliver substantially higher value added per worker.

### Appendix highlights (selected exact entries)
- Appendix Table 1: Country groups used; Sudan includes South Sudan due to data availability. * signifies employment estimates based on actual household surveys.
- Appendix Table 4: GDP per Capita (Current U.S. dollars) for selected countries in 2012 — selected entries preserved exactly:
  - Burundi 286
  - Malawi 360
  - Niger 431
  - Liberia 439
  - Madagascar 445
  - Central African Republic 480
  - Gambia, The 499
  - Ethiopia 504
  - Eritrea 505
  - Togo 590
  - Mozambique 590
  - Guinea-Bissau 600
  - Sierra Leone 634
  - Uganda 678
  - Burkina Faso 679
  - Nepal 686
  - Rwanda 688
  - São Tomé and Príncipe 688
  - Mali 703
  - Benin 808
  - Comoros 815
  - Tanzania 870
  - Bangladesh 916
  - Cambodia 946
  - Zimbabwe 961
  - Senegal 1,037
  - Cameroon 1,234
  - Côte d’Ivoire 1,235
  - Kenya 1,239
  - Lesotho 1,267
  - Pakistan 1,280
  - Lao P.D.R. 1,414
  - India 1,471
  - Ghana 1,683
  - Vietnam 1,753
  - Sub-Saharan African countries (median) 678
  - South Asia (median) 1,098
  - East Asia (median) 1,414

*Source: 44710-afrdp - References (PDF chapter/section) from the IMF document provided.*

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### 44710-afrdp - References

### Contributors
- Paper prepared by Louise Fox, Alun Thomas, and Cleary Haines.
- Acknowledged comments from conference participants in Nairobi and Zambia, Axel Schimmelpfenning, and the African Department’s Research Advisory Group.
- Authors state: "All remaining errors are our own."

### Overview — purpose and scope
- Objective: provide the most complete analysis of structural transformation among low- and low-middle-income countries in sub-Saharan Africa.
- Coverage: analysis covers over 30 countries (countries included as part of sub-Saharan Africa are shown in Appendix Table 1).
- Comparison: contrasts sub-Saharan Africa experience with selected fast-growing low-income Asian economies (Bangladesh, Cambodia, Vietnam).
- Timeframes emphasized: 1990s through 2010 and projections to 2020.

### Key concepts and theoretical framing
- Structural transformation requires:
  - (1) shift of GDP out of agriculture into modern industrial and service enterprises, and
  - (2) a follow-on shift in employment out of agriculture into nonagricultural enterprises, which involves migration and urbanization.
- Demographic transition (lower dependents and slower labor force growth) typically facilitates structural transformation.
- Cited theoretical perspectives:
  - Lewis (1954) — foundational work on structural transformation.
  - Rodrik (2015) — argues industrialization contributes via reallocation of workers to higher-productivity activities and stronger productivity growth in manufacturing; notes manufacturing employment peaks at lower ratios across countries.
  - Duarte and Restuccia (2010) — productivity differences narrowed in agriculture and industry between advanced and developing economies from 1956−2004; services productivity remained lower in developing countries.
  - McMillan and others (2014) — transformation associated with increasing employment in manufacturing and high-productivity services.
  - Amirapu and Subramanian (2015) — caution that highest-productivity sectors may employ too few people for broad-based transformation.

### Main empirical findings
- Growth performance:
  - Sub-Saharan Africa experienced one of its best decades of growth in the past decade.
  - Economic growth averaged about 4 percent per annum among upper-middle-income countries and about 6 percent per annum among low-income sub-Saharan African countries.
  - These growth rates surpass those of middle- and low-income Asia over the same period.
  - During the recent financial crisis, growth among low-income countries (LICs) in sub-Saharan Africa was broadly unaffected, in contrast to a sharp downturn among LICs in Asia.
- Output structure changes:
  - Agriculture declined as a share of GDP across the continent despite increases in agricultural commodity prices that pushed up the share in current prices.
  - The share of higher-productivity sectors increased as a share of GDP (Regional Economic Outlook Fall 2012).
  - In both LICs and low-middle-income countries (LMICs), agriculture fell as a share of GDP by about 8 percentage points combined with a corresponding rise in services.
  - Aggregate industry share remained fairly flat.
  - Manufacturing represents only about 7 percent of output in low-income sub-Saharan African countries.
- Employment and productivity dynamics (2000−10):
  - Structural transformation did occur in some sub-Saharan African countries during 2000−10, with convergence in sector productivities within countries.
  - The change was driven by strong movement of labor and output out of agriculture into services rather than into industry.
  - This movement lowered relative productivity in services, in part because much of the movement was into lower-productivity nonwage employment.
  - Several factors cited to explain limited industrialization: lower wage costs, lower energy costs, and lower logistical costs (Eifert, Gelb, and Ramachandran 2008; Gelb, Meyer, and Ramachandran 2013).
  - The paper argues that a sluggish demographic transition in sub-Saharan Africa, which swelled the labor force, played a major role in limiting industrial employment expansion.
- Contrast with recent low-income Asian transformers:
  - Bangladesh, Cambodia, Vietnam experienced much faster shifts of output and employment into industry.
  - In east Asia, employment share in industry grew rapidly through expansion of manufacturing wage employment.
  - Industrial expansion was labor intensive such that average labor productivity in industry declined relative to the economy-wide average.
  - Agricultural productivity improved owing to investments and labor shedding.
  - Low labor force growth in these Asian countries meant less labor for the economy to absorb, aiding structural transformation.

### Projections and implications (to 2020)
- Using updated output and employment projections, the analysis projects continuation of the African trend:
  - Sub-Saharan Africa will not be able to transform through manufacturing as east Asia did over the past two decades.
  - Continued gains expected in average labor productivity for low- and low-middle-income countries of sub-Saharan Africa.
  - Modest reduction in overall sectoral labor productivity dispersion in the economy, consistent with historical experience of Asian countries.
  - These productivity gains will not produce east Asian–type employment transformation in terms of:
    - type of employment (wage versus nonwage jobs), or
    - sector of employment (industry).
  - Drivers of continued divergence from east Asian path:
    - Much larger labor force growth in sub-Saharan Africa (implying agriculture cannot shed labor as fast as in east Asia).
    - Slow expansion of the tradables sector.
    - Continued development of a heterogeneous service sector with both high- and low-productivity segments.

### Structure of the paper (as presented)
- Chapter 1: reviews key structural transformation trends in sub-Saharan Africa since 1990; shows output and demographic transformations resulted in relatively weak employment transformation by 2010.
- Chapter 2: examines implications for changes in employment and relative productivity in sub-Saharan Africa and contrasts with selected fast-growing low-income Asian countries for the same period.
- Chapter 3: presents output and employment projection for 2020 and analyzes implications for structural transformation.
- Chapter 4: concluding thoughts.

*Source: 44710-afrdp - References (PDF chapter/section) from the IMF document provided.*

### 2. Low middle income

### 2. Low middle income

### Structural transformation in output
- The agricultural share fell by 15 percentage points of GDP in east Asian LICs over the period described.
- The manufacturing output share has risen by 4 percentage points in low-income east Asian countries.
- In east Asian LMICs, by 2010, industry (including manufacturing) accounted for about one-third more output than in sub-Saharan Africa.
- The share of manufacturing goods in the export basket of low- and low-middle-income sub-Saharan African countries is very low, at between 10 percent and 20 percent on average over the past two decades.
- In sub-Saharan African LICs, the industrial sector is more dominated by nontradables such as construction (see shaded yellow area in Figure 2.1, left panel).

### Demographics
- Labor force growth rates, 2000–2010:
  - east Asia: 1.2 percent per annum
  - south Asia: 1.7 percent per annum
  - sub-Saharan Africa: 2.6 percent per annum
- Median age:
  - sub-Saharan Africa: 18 (seven years younger than the median age in south Asia)
- Working-age population projection:
  - Between 2005 and 2020 the working-age population is projected to increase by over 200 million people.
- Fertility trend summary:
  - Africa’s fertility rate is falling much more slowly than the rate previously observed in Asia and Latin America in the 1970s (Filmer and Fox 2014).

### Employment transformation: categories and patterns
- Employment categories used in analysis:
  - Agricultural employment: predominantly smallholder farmers, includes wage work in agriculture, fishing, primary forestry.
  - Household enterprise (HE) employment: unincorporated, nonfarm, household-owned businesses (self-employed owners, family members working in those businesses).
  - Wage employment (industry or services): labor working outside agriculture receiving payment from an unrelated individual; includes public and private sectors; disaggregated into industry and services.
  - Unemployed: labor force participants not in employment according to the paper’s broad definition.
- Rationale: First two categories correspond to Lewis-type “traditional employment”; wage employment is mostly “modern” sector employment and expected to expand during structural transition.

### Key employment findings and statistics
- Regional employment distribution, 2010 (Figure 4):
  - Labor force size indicators shown on Figure 4: 183 million, 40 million, 150 million, 21 million, 395 million (as labeled on the figure).
- Informality and household enterprises:
  - The vast majority (70 percent) of nonfarm enterprises today are pure self-employment—just the owner operating the HE.
  - About 20 percent of these enterprises include a family member in the operation.
  - Only 10 percent have hired someone outside of the family.
  - Taken together, 80 percent of the labor force in 2010 was in household farms and firms (the “informal sector”).
- Wage employment:
  - By 2010, roughly 15 percent of the labor force in sub-Saharan Africa was in the wage sector.
  - Of that wage-sector employment, most were found in the services sector.
  - Using a subset of countries, it was estimated that in the LICs and LMICs, about half of all nonfarm wage employment was in formal jobs.
- Comparative pattern with Asia:
  - At similar levels of income, Asian countries have more employment in industry and less employment in agriculture than sub-Saharan African countries (data from the Groningen sector database; de Vries, Timmer, and de Vries 2015).
  - The share of employment in industry is much greater in Asia than in sub-Saharan Africa for a given level of GDP per capita.

### Comparative country-level employment snapshot (Table 1 rows as presented)
- Low-income
  - Sub-Saharan Africa: 13.3  2.610.718.268.5100.0
  - Lao P.D.R.: 13.5  5.4  8.119.067.5100.0
  - Bangladesh: 25.710.814.927.746.6100.0
  - Cambodia: 23.311.112.221.055.7100.0
- Low-middle-income
  - Sub-Saharan Africa: 13.4  1.811.629.157.5100.0
  - Vietnam: 31.814.317.519.149.1100.0

*Source: World Bank, World Development Indicators.*

### 2.4 in Bangladesh. But for sub-Saharan African LMICs, the same ratio was

### 44710-afrdp - 2.4 in Bangladesh. But for sub-Saharan African LMICs, the same ratio was

### Sectoral employment patterns and structural differences
- Agricultural share of employment remains high in sub-Saharan Africa; sectoral charts and comparisons show agriculture dominates employment more in sub-Saharan Africa than in Asia.
- Labor is more concentrated in the HE (household enterprise) sector in LMICs in sub-Saharan Africa.
- Comparator countries (rapidly growing Asian economies) have a larger share of employment in industrial wage jobs because they have a high number of manufacturing jobs.
- Resource-rich countries in sub-Saharan Africa:
  - Have not created much private wage employment.
  - Majority of wage employment is in the public sector.
  - High resource rents can create an economic structure unfriendly to private sector labor-intensive industry (Filmer and Fox 2014).

### Demographics, labor force growth, and implications for job creation
- Sluggish demographic transition in sub-Saharan Africa implies the labor force is growing much faster than in Asia or Latin America.
- Example: Vietnam’s labor force grew at 2.1 percent per annum over the past decade versus Senegal’s 3.1 percent per annum.
  - Because of this, "Senegal needs 50 percent more investment in manufacturing than Vietnam needed just to bring its share of employment in industry to the level of Vietnam."
- Higher dependency levels are expected to result in lower private savings, reducing capital available for investment in the modern sector.
- Consequence: Even with rapid, labor-intensive non-agricultural private sector growth comparable to east Asia, sub-Saharan Africa could not absorb the same share of the labor force.

### Employment composition and nature of job growth
- Much of the growth in nonfarm employment in sub-Saharan Africa occurred in household enterprises rather than modern industrial and service enterprises.
- Majority of Africa’s labor force still worked in agriculture, the least productive sector, which had yet to experience the substantial productivity growth seen in rapidly growing economies outside Africa.
- Projected employment distribution to 2020 (Figure 13 summary):
  - Industrial wage jobs share rises only from 2.3 to 3.2 percent of total employment in LICs and LMICs, because the jobs are growing from a very small base relative to labor force growth.
  - Household enterprises projected to rise by 4 percentage points to 22 percent of employment in LICs.
  - Many new jobs created in low-income countries such as Democratic Republic of the Congo and Ethiopia; agricultural sector remains important for employment.

### Productivity transformation: mechanisms and findings
- Structural transformation raises average labor productivity through:
  - Within-sector productivity gains.
  - Reallocation of workers from low-productivity to higher-productivity activities.
- Sector productivity ordering historically: agriculture lowest, services middle, industry highest (Bah 2013; McMillan and others 2014).
- Evidence:
  - Manufacturing productivity in Africa has deteriorated slightly relative to the United States since 1990, while for Asian countries the long-term trend has been flat (de Vries, Timmer, and de Vries 2015).
  - For selected sub-Saharan African countries (2000–10), industry productivity is generally above other sectors (Zambia an exception), but employment share shifted little into industry.
  - Employment has predominantly shifted out of agriculture into services (not industry).
  - Services expansion largely reflects lower-productivity self-employment growth.

### Comparison with low-income Asian countries (2000–10)
- Asian comparators: Bangladesh, Cambodia, Vietnam.
- Key differences enabling Asian outcomes:
  - Very labor-intensive industry employment growth:
    - Annual industry employment growth rates between 6 and 8 percent for Bangladesh and Vietnam.
    - Almost 20 percent annual industry employment growth for Cambodia.
  - Asian labor force growth much lower, so a lower share of labor remained stuck in agriculture.
  - Despite rapid overall productivity rise, labor-intensive growth in industry and services slightly dragged down relative productivity in those sectors (points in lower right-hand side of Figure 9).
- Productivity levels in common currency (2010 PPP) are very similar between Asian countries and non-resource-rich sub-Saharan African LICs and LMICs, with only Bangladesh slightly higher (Figures 10 and 11).
  - Suggests differences in industry employment generation lie in factors like lower wage costs and logistical factors that attract FDI, not necessarily higher productivity levels.

### Projected output, employment, and productivity forward through 2020
- Projected sector output distributions (Figure 12):
  - Continued strong growth across country groups.
  - Sharp decline in agricultural output share for all except resource-rich countries.
  - Resource-rich and lower-income countries projected to maintain recent growth patterns of above 6 percent per annum.
  - Industrial sector projected to grow at 7 percent per annum in low- and low-middle-income countries.
  - In resource-rich countries, service sector projected to grow very rapidly, with agriculture remaining fairly stable.
- Projected employment distribution (Figure 13 and discussion):
  - Little change from current structure; agricultural sector remains important for employment.
  - Share of industrial wage jobs remains under 3 percent due to base effects and resource export composition.
  - Household enterprises largest source of employment growth.
- Projected median labor productivity growth for LICs over 2010–20: 2 percent per annum.
  - Country variation:
    - Low of 1 percent per annum for Benin, Mali, and Senegal.
    - About 4 percent per annum for Rwanda and Sierra Leone.
- Shapley decomposition of aggregate labor productivity change over 2010–20:
  - About 63 percent of expected average productivity change accounted for by within-sector productivity changes.
  - About 37 percent accounted for by movements across sectors (employment reallocation).
  - Contrast: MR estimate for east Asia (1990–2005) found between-sector movements accounted for only 15 percent of total productivity gain (aggregate 3.9 percent per annum).
  - Saccone and Valli (2009) find China’s development had little to do with reallocation; India’s structural change component is 33 percent.

### Constraints and outlook
- Limits to achieving transformation through labor reallocation if reallocation mainly moves workers into services and household enterprises rather than into manufacturing as in east Asia.
- Rodrik (2015) suggests industrializing countries can expect manufacturing employment share to peak at about 15–18 percent of total employment; no low- or low-middle-income sub-Saharan African country approaches that level—most are below 5 percent.
- Even with optimistic output growth assumptions, employment absorption in nonagricultural sectors will mainly occur in:
  - Services sector (notably household enterprises).
  - Nontradables industrial sector (construction, utilities).
  - Not primarily in manufacturing.

### Policy-relevant implications (from analysis)
- To continue strong growth into the next decade, sub-Saharan Africa must:
  - Attract private investment needed to grow the manufacturing sector.
  - Strengthen efforts to raise within-sector productivity across agriculture, industry, and services.
- Demographic and savings dynamics imply policy focus should include:
  - Policies that raise private savings and investment capacity despite high dependency ratios.
  - Policies to increase labor absorption capacity per unit of investment, recognizing faster labor force growth relative to Asian comparators.
- Agricultural potential:
  - If African agriculture realizes its potential, agricultural jobs could become more productive and higher-earning, alleviating part of the employment challenge.

*Source: IMF, "Structural Transformation in Employment and Productivity," chapter excerpts and figures from the supplied content unit.*

### Conclusion

### Conclusion

### Prospects for transformational growth in sub-Saharan Africa
- It is possible for sub-Saharan Africa to develop a growth pattern that transforms the economy more rapidly if the movement from agriculture into services can generate large improvements in value addition.
- Benchmarking the projected structural employment shift in sub-Saharan Africa against what east Asia achieved historically shows that sub-Saharan Africa falls short in terms of the development of manufacturing employment.
- It remains an open question whether structural transformation can be speeded up with a continuation of the movement of labor from agriculture to services with a small role being played by the manufacturing sector.

### Structural transformation in employment and productivity
- The core analytical insight: faster transformation requires not just shifting labor out of agriculture but ensuring the destinations (particularly services and manufacturing) deliver substantially higher value added per worker.
- Historical comparison with east Asia highlights a deficiency in manufacturing employment development in sub-Saharan Africa, implying potential limits to productivity gains if the services-dominated shift does not raise value added sufficiently.

### Appendix highlights relevant to analysis
- Appendix Table 1: Sub-Saharan Africa: Country groups used in the paper, including designation of Resource Rich, Upper Middle-Income, Lower Middle-Income, and Low-Income countries. Note: Sudan includes South Sudan due to data availability. * signifies employment estimates based on actual household surveys.
- A specific annotation in the appendix: Countries marked with * are “Resource rich” with a LFPR 88%.
- Appendix Table 2: Asia country groupings used in the paper (South Asia and East Asia; Low-Middle-Income and Low-Income categories).
- Appendix Table 3: List of Country Abbreviations used in the paper.
- Appendix Table 4: GDP per Capita (Current U.S. dollars) for selected countries in 2012 — selected entries and medians preserved exactly:
  - Burundi 286
  - Malawi 360
  - Niger 431
  - Liberia 439
  - Madagascar 445
  - Central African Republic 480
  - Gambia, The 499
  - Ethiopia 504
  - Eritrea 505
  - Togo 590
  - Mozambique 590
  - Guinea-Bissau 600
  - Sierra Leone 634
  - Uganda 678
  - Burkina Faso 679
  - Nepal 686
  - Rwanda 688
  - São Tomé and Príncipe 688
  - Mali 703
  - Benin 808
  - Comoros 815
  - Tanzania 870
  - Bangladesh 916
  - Cambodia 946
  - Zimbabwe 961
  - Senegal 1,037
  - Cameroon 1,234
  - Côte d’Ivoire 1,235
  - Kenya 1,239
  - Lesotho 1,267
  - Pakistan 1,280
  - Lao P.D.R. 1,414
  - India 1,471
  - Ghana 1,683
  - Vietnam 1,753
  - Sub-Saharan African countries (median) 678
  - South Asia (median) 1,098
  - East Asia (median) 1,414

### Key implications for policy and research
- Policy focus should be on ensuring that labor reallocation from agriculture goes to sectors (services or manufacturing) that generate substantially higher value added per worker.
- Given the observed shortfall in manufacturing employment development relative to east Asia, policies that can either:
  - enhance the productivity and value addition of services absorbing labor, or
  - revive or support a greater role for manufacturing employment,
  merit priority in strategies for accelerating structural transformation.
- Further research is needed to determine whether a services-led transition with limited manufacturing can deliver the pace and scale of productivity gains required for rapid transformation.

*Source: Conclusion and Appendix, STRUCTURAL TRANSFORMATION IN EMPLOYMENT AND PRODUCTIVITY (IMF).*

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_Source: https://www.imf.org/-/media/files/publications/dp/2017/44710-afrdp.pdf_