A research paper that sought to explore heterogeneity in productivity and worker earning among firms in the metalworking sector in Ethiopia was presented by Dr. Girum Abebe on the 27th of October 2017 at EDRI’s conference room.
Presented as part of EDRI’s seminar series, the research report shared the seminar participants with key observations concerning productivity in the target sector. The study was conducted by EDRI research fellows, Dr. Girum Abebe, Dr. Tigabu Degu and Dr. Gebrehiwot Ageba.
We employ a longitudinal data to explore heterogeneity in productivity and worker earning among firms in the metalworking sector in Ethiopia. We measure multifactor and labor productivity using non-parametric and regression residual parametric approaches. While we find an increase in both labor and factor productivity over time, there also appear to be high productivity dispersion across firms and over time in the metalworking sector. The decomposition of industry-level productivity indicate that productivity increases is mostly explained by a cross productivity effect associated with reallocation of market shares across plants in the industry and that firm exit is preceded by declining productivity trends. We also show that while joint venture and foreign-owned businesses are on average more productive than domestic businesses, higher productivity is not accompanied by higher wages for production workers. We also find that the share of employment accounted for by firms is monotonically increasing in levels of productivity implying that the most productive firms create disproportionately the largest number of jobs. Our reduced model also indicates that labor productivity, TFP and worker’s earning is significantly higher in firms with a large share of workers with vocational training background, while the employment of foreign workers does not seem to produce similar productivity effects. These results are robust to the choice of productivity measures.