Abstract:
Productivity of manufacturing industry is a global problem including both in developed and
developing countries. Especially in developing countries like Ethiopia, Productivity of
manufacturing industries’ specifically large and medium scale has been one of the most problems
and it had impact on economy of the country. The purpose of this study was to identify determinants
of large and medium scale manufacturing industries’ productivity in Ethiopia. For the economic
development of any country, productivity is an issue that must be fully understood, addressed, and
pursued. To achieve the objectives of the study, panel data type over the period of 2011 to 2020
and secondary source of data were collected from central Statistical Agency. The study include
about 3759 large and medium scale manufacturing industries which categorized them in to 15 sub
sectors based on the manufacturing industries classification criteria of Central Statistical Agency.
Among different measure of the productivity of the manufacturing industries, total factor
productivity was used in this study. Random effect regression econometric model was employed
to determine the determinants of large and medium scale manufacturing industries productivity.
The descriptive result of the study shows that there was an increment of performance of the
manufacturing industries during the study period except in the year 2019 which was the large fail
of performance and labour productivity because of the covid-19 impact. The random effect
Econometric regression result prevailed that labor, capital, raw materials and energy consumed
were the major determinants for productivity of the manufacturing industries. The regression
result shows that labour, capital and energy consumed had statistically significant and positively
relationship with the productivity while raw material had significant and negatively relationship
with the productivity of large and medium manufacturing industries in Ethiopia at 5% of level of
significance. And the result of the model revealed that 62.30 % explanatory variables used for this
study jointly statistically significant and adequate enough to explain the change in TFP. Therefore,
in order to improve the productivity of manufacturing industries, the industrial firms should
increase the labor forces in industries, increase their capital and prioritized the domestic raw
material. And the government should works on the infrastructures like power supplies which are
mandatory and set policies that improves inputs for productivities.
