industries. Within each single digit industry labor productivity is (a) far lower in microenterprises than in SMEs or larger firms and (b) highest in medium sized enterprises (with the single exception of the hotels and restaurants). Moreover, small enterprises occupy the middle of the productivity spectrum, being more productive than microenterprises in every industry but also always falling short of the productivity levels of mid‐sized and larger firms, the only exceptions to this second rule being that two of the fourteen (two‐digit ISIC) comparative advantage industries, namely, garments and food and beverages, where labor productivity is on average significantly higher in small enterprises not only relative microenterprises but also compared to medium sized and large ones.

This pattern means that economies of scale have been important in producing the effects of the observed sectorial employment shifts on aggregate sectorial productivity. In particular, it would mean that internal economies of scale are potentially a major source of productivity growth and job growth in most industries. But it also suggests that those internal economies are limited to the growth of micro and small enterprises. In most industries the scope for productivity growth through such internal economies would be exhausted by the time an enterprise has grown into midsized company (Tables 17 and 18). The scope for enterprise growth is even more limited in the garments and food and beverages industries where the optimal scale seems to occur at a work force of 20 or fewer people.

# **_3.3.2. Across age‐groups: Established employers vs. younger businesses_**

To the extent that reallocation is driven by the expansion or contraction or exit decisions of incumbents those decisions are likely to depend on how long the firm has been in operation ‐that is, on its age. This in turn is likely to be reflected in some type of life cycle effect on firm level productivity whereby established businesses are more or less productive than younger firms. Our characterization of Uganda’s structural transformation in the 2000s should therefore include a determination not only of the relative importance of the three age groups ‐ as sources and destination of inter‐sectorial reallocation of labor, but also if that is associated with systematic productivity gaps across the three groups.

====Tables 20, 20A and 21 here=== Table 21 shows that labor productivity is higher in startups and younger businesses than in established businesses while tables 20 and 20A broadly confirm the pattern of reallocation of employment and output across age groups observed between UBR 2001 and UBR2010. The productivity gap between the two age groups holds across the economy as well as within each broad sector including commercial agriculture, manufacturing and services (Table 21). Labor productivity is significantly higher in startups than even the 5 and 10 year age group in samples drawn from commercial farming and services. Businesses in the 5 to 10 year age group do show higher labor productivity than in startups and established enterprises in samples drawn from manufacturing and construction as well. But in no sector 30