Is the service sector also shedding jobs? Not really. Figure 8 shows the relationship between the share of a country’s total employment in the service sector against its stage of development for some 100 countries. This relationship is also shown for three different points in time, 1988 (blue), 2000 (green), and 2010 (red). Notice that the service job curves have shifted upwards and outwards over time. This means that services are creating more jobs and also at earlier stage of development. Services are now more dynamic and are absorbing a greater proportion of labor.

<mark>In developed and developing countries alike, labor is being shed from both agriculture and manufacturing (see figure 9). Jobs in agriculture are shrinking as expected. That jobs are shrinking in the manufacturing is a new trend. Although the share of agricultural sector in employment has fallen from over 90 percent in 1992 to less than 80 percent in 2012 in a latecomer to development like Ethiopia, it continues to be the dominant source of employment in the country. There is room to shift more labor out of agriculture if the non-agricultural and</mark> modern sector can grow faster and absorb more labor.

<mark>Because labor productivity growth in developed countries is higher in services than in industry, it implies that the global technology frontier for services is still shifting up, while that for industry has stagnated. At the same time, labor productivity growth in services in low income developing countries has also accelerated, and its growth has outstripped productivity growth in industry.</mark> However, low income countries cannot afford to be a one-trick pony. Thousands of students graduating from universities and colleges have aspirations of not returning to their parents’ farms and villages, but instead moving into urban areas, to look for jobs in the modern sector.

Much of Africa has the youngest population in the world, with more than 50% of the population below the age of 25. The median age in Africa is seven years younger than that of South Asia, the next youngest region. Every year for the next decade, some 11 million young people will enter the job market. This demographic dividend offers a tremendous opportunity for Africa to build the skilled workforce that will serve as the engine for the economic transformation. Building a skilled workforce can spur increased economic growth, but not without more entrepreneurs.

# **5. Entrepreneurship**

The role of entrepreneurship in structural transformation, growth and jobs has a long intellectual tradition (Cantillion 1730, Knight 1921, Schumpeter 1942). As Schumpeter said “...the inventor produces ideas, the entrepreneur ‘gets things done.....”. Although a great deal of productivity growth is spurred by existing firms, new entrepreneurs play a vital role.

As economies undergo structural transformation, existing firms see their productivity decline and their jobs shrink. It is the new firms that tend to be more productive than existing firms and create jobs. Thus, entrepreneurship facilitates a faster pace of structural transformation by shifting resources away from traditional and into modern sectors more efficiently, and by keeping incumbent firms from growing complacent. In a study of 23 OECD countries, Audretsch et al. found that a sustained entrepreneurship rate is essential for economic growth. Similar 14