Determinants Of Large And Medium Scale Manufacturing Industries’ Productivity In Ethiopia

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.