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Trade and profit efficiency of manufacturing industries in South Africa

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  • Brian Mazorodze
  • Irrshad Kaseeram
  • Lorraine Greyling

Abstract

The relationship between trade and industrial performance has received a great deal of empirical attention over the past three decades. Much of this empirical attention has however focused on productivity, employment, and output growth oblivious of profit effects – the primary motive for manufacturers. Different from this literature, this paper contributes to the existing body of knowledge by testing the hypothesis that trade affects profit efficiency of manufacturing industries through its effect on technical and allocative efficiency. Using a panel stochastic frontier model based on 28 South African manufacturing industries observed between 1970 and 2016, evidence confirms a strong positive effect of export intensity on profit efficiency that operates mainly through technical efficiency. Import penetration appears to have improved allocative efficiency without having a discernible effect on profit efficiency. The former result lends empirical support to the long-standing view that outward-oriented policies have the potential to enhance industrial profit maximization while the latter result suggests that inward-oriented polices at worst promote suboptimal input allocation.

Suggested Citation

  • Brian Mazorodze & Irrshad Kaseeram & Lorraine Greyling, 2021. "Trade and profit efficiency of manufacturing industries in South Africa," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 30(5), pages 707-724, July.
    • Handle: RePEc:taf:jitecd:v:30:y:2021:i:5:p:707-724
    DOI: 10.1080/09638199.2021.1893374
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    Cited by:

    1. Hammoudeh, Shawkat & Tiwari, Aviral Kumar & Abakah, Emmanuel Joel Aikins & Adeabah, David, 2023. "Global value chains in sub-Saharan Africa: The role of business regulations, policies and institutions," Emerging Markets Review, Elsevier, vol. 57(C).
    2. Brian Tavonga Mazorodze, 2023. "Why Has Trade Barely Moved Sub-Saharan Africa to Its Economic Potential?," Economies, MDPI, vol. 11(10), pages 1-27, October.

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