The Urban Labour Market during Structural Adjustment Ethiopia.pdfVIP

The urban labour market during structural adjustment: Ethiopia 1990-1997 * Pramila Krishnan , Tesfaye Gebre SelassieNN and Stefan Dercon*+ WPS/98-9 April 1998 Centre for the Study of African Economies Institute of Economics and Statistics University of Oxford St Cross Building Manor Road Oxford OX1 3UL * Centre for the Study of African Economies N Economics Department, Addis Ababa University + Katholieke Universiteit Leuven Correspondence: pramila.krishnan@economics.ox.ac.uk Abstract: The paper examines the effects of reform and structural adjustment on the urban labour market in Ethiopia using a combination of cross-section and panel data based on surveys conducted both pre- and post- reform. During this period Ethiopia has seen impressive growth in GDP but little in the way of private investment. Meanwhile, the labour market has remained remarkably unresponsive to the pressures of reform despite the growing queues of the educated unemployed. While the public sector has contracted over the period, real wages have been re-adjusted to almost pre-reform levels; furthermore, real wages have grown in the private sector, while returns to education have remained largely unaffected. 1. Introduction This paper examines the response of the labour market to a period of structural adjustment. Since 1992, Ethiopia has undertaken a programme of reform and structural adjustment. We ask what the effect has been on the allocation of the labour force in different sectors, on the response of real wages and o