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What drives productivity change in the manufacturing sector? Evidence from the metalworking industry in Ethiopia

Author

Listed:
  • Girum Abebe

    (Ethiopian Development Research Institute)

  • Tigabu Degu

    (Ethiopian Development Research Institute)

  • Gebrehiwot Ageba

    (Ethiopian Development Research Institute)

Abstract

We employ longitudinal data to explore sources of heterogeneity in productivity among firms in the metalworking industry in Ethiopia. We measure multifactor and labor productivity using non-parametric and regression residual parametric approaches. We find a sizable improvement in both labor productivity and TFP over time, which is also accompanied by large productivity dispersion across firms in the industry. The decomposition of industry-level productivity indicate that productivity increases is mostly explained by the reallocation of market shares across plants in the industry and that firm exit is preceded by declining productivity trends. Our reduced model also indicates that labor productivity and TFP is significantly higher in firms with a large share of workers with vocational training background. Productivity, however, does not differ with firm ownership. These results are robust to the choice of productivity measures.

Suggested Citation

  • Girum Abebe & Tigabu Degu & Gebrehiwot Ageba, 2018. "What drives productivity change in the manufacturing sector? Evidence from the metalworking industry in Ethiopia," Working Papers 020, Ethiopian Development Research Institute.
  • Handle: RePEc:etd:wpaper:020
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    References listed on IDEAS

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    More about this item

    Keywords

    metalworking; labor productivity; TFP; exit; entry; human capital;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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