Growing Without Changing: A Tale Of Egypt'S Weak Productivity Growth

Despite fast growth during 2000-2010, Egypt saw limited productivity gains from sectoral labor reallocation over the past three decades. Using a novel data set and updated measures of productivity growth induced by structural change in employment patterns across a large set of countries, we explain why Egypt failed to significantly reduce unemployment, lower poverty, or raise productivity. We use cross-country comparisons, counterfactual scenarios, and regression analysis to demonstrate that limited openness to trade, weak export diversification, and low access to finance prevented Egypt from tapping the growth potential of a structural shift in labor towards skilled manufacturing and private services, locking Egypt instead into a "low value trap." The paper suggests policy implications on how to overcome impediments to efficient sectoral reallocation of workers.