Page 74 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.78, # 2, 2021, pp. 74-88

FACTORS AFFECT THE PRODUCTIVITY OF LARGE AND
MEDIUM -SCALE MANUFACTURING INDUSTRY IN
ETHIOPIA

ABREHET, MEHARI
Azerbaijan State University of Economics, e-mail: [email protected]

Received: March 26; accepted October 29, 2021; published online December 24, 2021

ABSTRACT
One of the contributions of the productive manufacturing sector is employment
creation, strong linkages, and spill-over effects. It also accelerates long-term
economic growth through targeted investment in productive capacity and
manufacturing sector-driven growth. The study aims to investigate the main factors
of total productivity of large and medium-scale manufacturing industries in Ethiopia
from 2001 to 2017. Generalized Method of Moments of the econometric model
system was applied to analyze the determinant factor of the total productivity of
large and medium-scale manufacturing industries. The result confirmed that the
loan provided to the manufacturing industries, the intensity of imported raw
materials, human capital development , foreign direct investment, and infrastructure
growth (road coverage) had a significant positive effect on the factor of productivity.
Nevertheless, export intensity and macroeconomic instability(inflation) adversely
affected the total factor of productivity. The descriptive analysis indicates that the
number of firms, jobs created, and value-added per worker are increasing
sustainably and are dominated by the agro-processing sector and mineral industries.
However, there was no similar progress shown in manufactured exports. It affects by
a shortage of supply of raw materials, weak infrastructure, absence of demand for
products, and lack of working capital. The practical significance of this research
allows creating a new idea of an investment that encouraged producers to improve
efficiency and productivity using the result of the study. It also creates stable
macroeconomic stability in the area of large and medium scale manufacturing
industries and the country in general. Finally, it contributes significantly to the
country’s economic growth and poverty reduction.

Keywords: Manufacturing, industry, productivity, determinants, generalized
method of moment

Jel classification: L60, L69, D24

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