This study examines the relationships between firm growth and firm size, age, and labor productivity, using annual census–based panel data on Ethiopian manufacturing firms. The study explicitly addresses the ongoing statistical concerns in firm growth models such as sample censoring, regression to the mean, and unobserved heterogeneity. Our empirical results indicate that firm growth decreases with size. Smaller firms have faster rates of growth than larger firms, even after compensating for their higher attrition rates. The negative relation between age and growth predicted by the learning model is found to apply only to younger firms. Labor productivity affects firm growth positively, which indicates that there is a market selection process at work during the period of economic reforms in Ethiopia.
Abstract:This paper examines the causal relationship between exporting and productivity using a ten years long plant-level panel data set from an annual census of Ethiopian manufacturing, rarely available in the sub-Saharan Africa. We exploited its length to trace the trajectory of TFP and other productivity measures of groups of firms classified by their export history. We then tested learning-by-exporting using a onestep system-GMM approach with the export-status included directly in the production function. We addressed potential endogeneity problems by using instrumental variables, and also applied a matching analysis to address potential selection bias. We found strong evidence of not only self-selection but also learning-by-exporting. Depending on the specification previous exporting appears to have shifted the production function by 15-32 %. Exporters had on average three times more employees, and paid 1.6 times higher average wage than those of non-exporters. JEL-Classification: F14, O14, D21, L60
This paper provides a case study of the Ethiopian flower export industry which successfully emerged at time when the EU market (main destination) was already characterized by increasingly stringent standards and delivery requirements. Entering this market required a multitude of capabilities at firm, sector and national levels.Several of these capabilities were absent or weak in the domestic market when the new activity kicked off. The paper analyzes how the capabilities of individual firms and the industry at large co-evolved and the role of various actors in the 'market formation' process.JEL Classification: O12, O13, O19
This paper examines the discovery process of a recent and extraordinarily successful, nontraditional, export activity in developing country -namely the flower industry in Ethiopia. To be able to break into non-traditional exports, developing countries do not need to invent new products, but mainly producing at lower cost goods that are already established in the world markets. This necessitates tapping into the global pool of knowledge and diffusion of the imported technology in the course of experimentation. This is an ongoing learning process which involves continuous interaction among different actors, institutions and networks. The paper adopts a functional innovation systems framework in a catching-up country context, to map the dynamics of the interactions among various actors in the discovery process and how success was achieved. It provides detailed information on sector development based on a recently conducted census of all flower farms in Ethiopia and follow-up interviews with industry leaders and policy makers. The study highlights the strategic collaboration required between government and the private sector in the promotion of a non-traditional export in a developing country. It should enrich our understanding of development strategies in the context of an increasingly globalized world.
Global trade in agriculture and food products is increasingly governed by an array of standards. In order to continue exporting, developing countries have little choice but to comply with the new requirements. This study uses a census based panel data set from the nascent floriculture industry in Ethiopia to empirically examine the determinants of firms' adoption of international private standards in fresh horticulture produce in large-scale estate farms. The econometric analysis shows that larger size, older, and foreign owned firms are more likely to adopt the private standards. Moreover, this study analyzes the overall industry level efforts and public-private partnership to launch and implement a national scheme GAP and build a firm's capacity to comply with the standards.JEL classifications: L15, O19, Q17
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