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Firm heterogeneity and market selection in Sub-Saharan Africa : does it spur industrial progress?

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  • Shiferaw, A.

Abstract

This article investigates the processes of market selection and industry dynamics in a sub-Saharan Africa context. Using census-based longitudinal data, it examines the distribution of productivity within an industry to determine whether patterns of firm entry, exit, and survival are driven by underlying efficiency differences. It also estimates the contributions to industry-level productivity growth of producer turnover and the reallocation of resources from less efficient producers to more efficient ones. The article shows that markets in sub-Saharan Africa, as represented by Ethiopia, are at least as strong as those in other regions in selecting efficient firms. Tolerance of inefficient firms also declines with the degree of exposure to international competition. While reallocation of resources played a positive and significant role for industry-level productivity growth, it only managed to offset the declining trend in intrafirm productivity. The article concludes that although markets have played the expected disciplinary role, long-term industrial growth requires more than functional markets, particularly in addressing firm-level innovation.
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Suggested Citation

  • Shiferaw, A., 2005. "Firm heterogeneity and market selection in Sub-Saharan Africa : does it spur industrial progress?," ISS Working Papers - General Series 19171, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
  • Handle: RePEc:ems:euriss:19171
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    Cited by:

    1. Yoko Asuyama & Dalin Chhun & Takahiro Fukunishi & Seiha Neou & Tatsufumi Yamagata, 2013. "Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth and wage profile under trade liberalization," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 18(1), pages 51-70.
    2. Shiferaw, Admasu & Bedi, Arjun S., 2009. "The Dynamics of Job Creation and Job Destruction: Is Sub-Saharan Africa Different?," IZA Discussion Papers 4623, Institute for the Study of Labor (IZA).
    3. Getinet Haile & Ilina Srour & Marco Vivarelli, 2017. "Imported technology and manufacturing employment in Ethiopia," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 7(1), pages 1-23, April.
    4. Shiferaw, Admasu, 2009. "Survival of Private Sector Manufacturing Establishments in Africa: The Role of Productivity and Ownership," World Development, Elsevier, vol. 37(3), pages 572-584, March.
    5. repec:fec:journl:v:12:y:2017:i:4:p:660-676 is not listed on IDEAS
    6. Haile, Getinet Astatike & Srour, Ilina & Vivarelli, Marco, 2013. "The Impact of Globalization and Technology Transfer on Manufacturing Employment and Skills in Ethiopia," IZA Discussion Papers 7820, Institute for the Study of Labor (IZA).
    7. Yu Chen & Haiwen Zhou, 2017. "An Overlapping-Generations Model of Firm Heterogeneity in Economic Development," Frontiers of Economics in China, Higher Education Press, vol. 12(4), pages 660-676, December.
    8. Shiferaw, A., 2006. "Entry, survival, and growth of manufacturing firms in Ethiopia," ISS Working Papers - General Series 19185, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    9. Arne Bigsten & Mulu Gebreeyesus, 2007. "The Small, the Young, and the Productive: Determinants of Manufacturing Firm Growth in Ethiopia," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 813-840.
    10. Klapper, Leora & Richmond, Christine, 2011. "Patterns of business creation, survival and growth: Evidence from Africa," Labour Economics, Elsevier, vol. 18(S1), pages 32-44.
    11. Haile, Getinet & Srour, Ilina & Vivarelli, Marco, 2017. "Globalization, Technological Change and Skills: Evidence from Ethiopia," GLO Discussion Paper Series 16, Global Labor Organization (GLO).
    12. Getinet Haile & Ilina Srour & Marco Vivarelli, 2014. "Globalization and Technology Transfer in Ethiopia: Their Impact on Domestic Employment and Skills," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1498, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    13. Fukunishi, Takahiro, 2013. "Political crisis and suspension of duty-free access in Madagascar : assessment of impacts on the garment industry," IDE Discussion Papers 422, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    14. Admasu Shiferaw, 2009. "Which Firms Invest Less Under Uncertainty? Evidence from Ethiopian Manufacturing," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 2, Courant Research Centre PEG, revised 30 Jun 2013.
    15. Shiferaw, A., 2006. "Capital adjustment patterns and uncertainty in African manufacturing," ISS Working Papers - General Series 18759, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.

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