Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 303: Firm Productivity and Exports: Evidence from Ethiopian manufacturing

Arne Bigsten () and Mulu Gebreeyesus ()
Additional contact information
Arne Bigsten: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Postal: Box 640, SE 40530 GÖTEBORG
Mulu Gebreeyesus: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Postal: Box 640, SE 40530 GÖTEBORG

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 one-step 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.

Keywords: Productivity; exports; Ethiopia; manufacturing

JEL-codes: D21; F14; L60; O14

31 pages, April 30, 2008

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