Arne Bigsten

Do African Manufacturing Firms Learn from Exporting

We use firm-level panel data for the manufacturing sector in four African countries to investigate whether exporting impacts on efficiency, and whether efficient firms self-select into the export market. Based on simultaneous estimation of a production function and an export regression, our preferred results indicate significant efficiency gains from exporting, which can be interpreted as learning by exporting. We show that modelling unobserved heterogeneity by a flexible approach is important for deriving this conclusion. A policy implication of our results is that Africa would gain from orientating its manufacturing sector towards exporting.

Growth and Poverty Reduction in Ethiopia: Evidence from Household Panel Surveys

The paper investigates the poverty impact of growth in Ethiopia by analysing panel data covering the period 1994 to 1997, a period of economic recovery driven by good weather, peace, and much improved macro economic management. Unlike mostdeveloping countries, urban and rural poverty in Ethiopia are not significantly different from each other. The analysis of the structure of poverty shows asset ownership,education, type of crops planted, dependency ratios, and location to be important determinants. Decomposition of changes in poverty into the growth and redistribution components indicates that potential poverty-reduction due to the increase in real per capita income was to some extent counteracted by worsening income distribution. The implications of the results for a pro-poor policy are discussed.

Rates of Return on Physical and Human Capital in Africa's Manufacturing Sector

In this paper two sets of issues are addressed using panel data from the manufacturing sector of five African countries. First, how high are the returns to human relative to physical capital. Second, what is the relative importance of technology and endowments of human and physical capital in determining differences in earnings and productivity across the countries. Evidence from earnings functions shows that the private returns to both experience and education rise with the level of education. Private returns rise from 3 per cent at the primary level, to 10 per cent at the secondary level and 35 per cent for tertiary. Evidence from the production function gives lower returns on education than from the earnings function. Rates of return on physical capital exceed 20 per cent and greatly exceed the average return on human capital. Data is available on the stocks of human and physical capital across the countries. Productivity and earnings differentials are shown to be large between Cameroon and Ghana. These differences are due almost entirely to differences in physical, not human, capital endowments.

Efficiency, Technical Progress, and Best Practice in Chinese State Enterprises (1980-1994)

In spite of rapid economic growth and swift structural change during the last two decades, China’s industrial reform is far from complete, especially with regard to state enterprises (SOEs). Although troubled with huge financial losses, heavy debt, and substantial over-staffing, SOEs will continue to play a crucial part in the government policy to maintain social stability and economic growth in China. This study, based on samples of about 700 state enterprises during 1980-94, investigates productivity performance of the SOEs using Data Envelopment Analysis and Malmquist Index. Our empirical results show that average technical efficiency had been low among the sample SOEs. Considerable productivity growth was found, but it was mainly accomplished through technical progress rather than efficiency improvement. Regression analyses indicate that wage incentives and education had positive impacts on productivity growth, while large scale was an important determinant of whether an SOE was applying best practice technology. It is also shown that large SOEs were more likely to generate technical progress. These findings are consistent with the industrial structural adjustment program initiated by the government in 1994, which has focused on improving productive efficiency via redundancies and technology upgrading, and on building its best SOEs into conglomerates.

The Small, the Young, and the Productive: Determinants of Manufacturing Firm Growth in Ethiopia

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.

Investment in Africa`s manufacturing sector: a four-country panel data analysis

Firm-level data for the manufacturing sector in Africa, presented in this paper, shows very low levels of investment. A positive effect from profits onto investment is identified in a flexible accelerator specification of the investment function controlling for firm fixed effects. There is evidence that this effect is confined to smaller firms. A comparison with other studies shows that, for such firms, the profit effect is much smaller in Africa than in other countries. Reasons for the relative insensitivity of investment to profits in African firms are suggested.

Adaptation and distress in the urban economy: A study of Kampala households

Abstract Though Uganda underwent fairly rapid economic growth after independence in 1962, the civil strife and external shocks of the 1970s and 1980s led to rapid decline. The impacts on Kampala households reflect, in many ways, those on the rest of the country and have led to: extensive diversification of incomes, mainly to reduce the risks perceived in todays unstable environment; a decrease in the share of wages in total incomes, compensated by allowances of various types; increased engagement in informal sector activities and even farming in the urban sector. The main tasks of economic management are twofold: to stabilize wage employment and to ameliorate the social misery caused by the decline. The limited resource base and the continued external disturbances make the prospects for sustained recovery precarious.

Exports of African manufactures: macro policy and firm behaviour

Macro policy has changed the real exchange rates for African countries dramatically in the 1990s. In this paper the possible impact of macroeconomic policy on firms in the manufacturing sector is considered based on a panel survey of such firms in Cameroon. Kenya, Ghana and Zimbabwe. The data show that most large African manufacturing firms do export, but most do not specialize in exporting. An export equation is estimated both for the propensity of the firms to export and the percentage of output exported. It is shown that a stable export function can be estimated for all four countries over the three rounds of the survey. While there is no evidence that real devaluations have effected a general rise in manufactured exports there is evidence from the surveys of a rise in the percentage of output exported from the Cameroon. Reasons for the lack of a general response to macro policy are suggested. In the Cameroon, large firms did increase their propensity to export. Understanding the links between macro policy and firm performance may require an understanding of how such policies impact on different types of firms.

Adjustment Costs, Irreversibility and Investment Patterns in African Manufacturing

This paper examines dynamic patterns of investment in Cameroon, Ghana, Kenya, Zambia and Zimbabwe, assessing the consistency of those patterns with different adjustment cost structures. Using survey data on manufactured firms, we document the importance of zero investment episodes and lumpy investment. The proportion of firms experiencing large investment spikes is significant in explaining aggregate manufacturing investment. Taken together, evidence from descriptive statistics, average investment regressions modeling the response to capital imbalance, and transition data analysis indicate that irreversibility is an important factor considered by firms when making investment plans. The picture is not unanimous however, and some explanations for the mixed results are proposed.This paper examines dynamic patterns of investment in Cameroon, Ghana, Kenya, Zambia and Zimbabwe, assessing the consistency of those patterns with different adjustment cost structures. Using survey data on manufactured firms, we document the importance of zero investment episodes and lumpy investment. The proportion of firms experiencing large investment spikes is significant in explaining aggregate manufacturing investment. Taken together, evidence from descriptive statistics, average investment regressions modeling the response to capital imbalance, and transition data analysis indicate that irreversibility is an important factor considered by firms when making investment plans. The picture is not unanimous however, and some explanations for the mixed results are proposed.

Firm Productivity and Exports: Evidence from Ethiopian manufacturing

Abstract This paper examines the causal relationship between exporting and productivity using plant-level panel data for Ethiopian manufacturing. We trace the trajectory of total factor productivity and other productivity measures of groups of firms classified by their export history. We tested learning-by-exporting using a one-step system-general method of moments approach with the export-status included directly in the production function. 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 15–26 per cent. Exporters had on average three times more employees, and paid 1.6 times higher average wage than non-exporters.