In 1979, W. Arthur Lewis received the Nobel Prize in economics for his analysis of growth dynamics in developing countries. Deservedly so: His conceptual framework has proved invaluable in understanding and guiding structural change across a range of emerging economies.

The basic idea that Lewis emphasized is that developing countries initially grow by expanding their export sectors, which absorb the surplus labor in traditional sectors like agriculture. As incomes and purchasing power rise, domestic sectors expand along with the tradable sectors. Productivity and incomes in the largely urban, labor-intensive manufacturing sectors tend to be 3-4 times higher than in the traditional sectors, so average incomes rise as more people go to work in the expanding export sector. But, as Lewis noted, this also means that wage growth in the export sector will remain depressed as long as there is surplus labor elsewhere.


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Current and past administrations have tried to tap into the potential of Ethiopians living abroad. As much as there always has been the understanding that the diaspora can play a greater role in the Ethiopian economy, politics has always taken over the way in which government looks at this vast community.

The Ethiopian diaspora—vocal in their criticism of local politics—has long been regarded as a threat to government. Hence, they have been alienated from social, political, and economic activities of their home country. For the most part, the nation has not been able to tap into the opportunities of economic potential which the community possesses.

The recent mobilization of the diaspora in the diplomatic arena gives an insight into their economic potential. If mobilized upon the appropriate strategy, they can play a greater role beyond remittance and direct financial support to be investors and champions of investment, writes EBR’s Bamlak Fekadu.



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