Urban Agglomerations and Wage and Self-employment Jobs in Ethiopia

Abstract

This paper studies how town size is associated with the balance between wage employment and self-employment in Ethiopia, a low-income country with a relatively low urbanization rate. Using cross-sectional worker-level data and an instrumental-variable strategy, it examines whether urban agglomeration is linked to workers’ employment mode. The estimates indicate that a logarithmic increase in town population lowers the probability of self-employment by 7.9 percentage points. The relationship is especially pronounced for women, younger workers, and people with less education, who are more likely to hold wage jobs in larger towns. The findings point to a link between urban concentration and the transformation of work, complementing evidence on agglomeration and productivity that has largely focused on developed economies.