January 2023

IZA DP No. 15845: Sectoral Linkage in the Ethiopian Economy: A Social Accounting Matrix Multiplier Analysis

Selamawit G. Kebede, Almas Heshmati

This research investigates the Ethiopian economy's sectoral linkages. It examines the forward and backward production and total linkages of the industry with the agriculture and service sectors. The import penetration and export intensity of the agriculture-based industry and the manufacturing industry are also discussed. The study used the Ethiopian Social Accounting Matrix (SAM) database and made a multiplier analysis to explore the linkages and estimate the multiplier coefficients. The results show that agriculture has a relatively strong linkage with other sectors while the agriculture-based industry has weak forward linkages, and the manufacturing industry has weak backward and forward linkages with other sectors of the economy. The multiplier analysis shows that an exogenous shock to the agriculture-based industry has a higher multiplier effect than a shock to the manufacturing industry. Economic policy should focus on agriculture-based industry investments to positively augment the Ethiopian industrialization process and the overall economy.