Multi-product Firms and Product Basket Adjustments in Ethiopian Manufacturing
AbstractThis paper analyzes firm level adjustment of the product mix and its implications for aggregate output growth. Using firm level panel data from Ethiopian manufacturing during the period 1996-2007, it shows that about 30% of firms adjust their ‘extensive margin’ annually by adding and/or dropping at least one product and about half of those firms undertake such adjustment only through product adding. At the aggregate level, about 30% of annual growth in sales is accounted for by the adjustment of the extensive margin which is more than four times the net contribution of firm entry and exit. The paper also shows that the likelihood of adding a product tends to decline with firm size and increases dramatically with the incidence of large investment outlays. While the level of productivity does not seem to increase the probability of adding a product, a net increase in the number of products is strongly associated with subsequent growth in sales, productivity and capital stock at the firm level.
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Bibliographic InfoPaper provided by Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 56.
Date of creation: 31 Dec 2010
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Product Switching; Multiproduct Firms; Extensive Margin; Intensive Margin; Ethiopian Manufacturing;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-30 (All new papers)
- NEP-BEC-2011-01-30 (Business Economics)
- NEP-EFF-2011-01-30 (Efficiency & Productivity)
- NEP-INT-2011-01-30 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Van Biesebroeck, Johannes, 2005. "Firm Size Matters: Growth and Productivity Growth in African Manufacturing," Economic Development and Cultural Change, University of Chicago Press, vol. 53(3), pages 545-83, April.
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