The study attempted to analyze the patterns of the changing functional structure of major urban
centers of Ethiopia over the period of 2009 to 2012. An economic base, export employment
multiplier and shift share analysis were used to identify the basic sectors, the export employment
and expanding and declining industries in fifteen major urban centers. The location quotient
results showed that there have been changes in economic bases, for twelve out of fifteen urban
centers. The major sources of export employment were construction, distributive and social
services for most of the towns considered. Export employment analysis has indicated that some
towns of leading regions have relatively higher percentage of export employment compared to
others. In general, the major drivers of the urban employment growth in many urban centers
over the study period were found to be distributive, social and extractive sectors. However, the
role of the transformative economic sectors, particularly the manufacturing sector is not as such
encouraging for many towns. Against this back drop, the analysis surfaced local economic
development issue such as how the towns included in this study could capitalize more on the
transformative economic sectors through various incentive mechanisms