The Quest for Firms’ Productivity in Strategic Industries in Ethiopia: Evidences from Growth and Transformation Plan

Abstract

The Ethiopian government has launched and implemented a five-year Growth and Transformation Plan (GTP) in two waves in 2010 and 2015 with the primary objective of enhancing economic transformation through strategic gear shifter industries. However, there is no due attention to productivity and rigorous examination, despite the massive financial injection. This study, therefore, aims to examine the driving forces of firms’ productivity using different methods, including panel data modeling, Levinsohn & Petrin, difference GMM, and system GMM estimation techniques. The study finds that operational labor exhibited negative and insignificant relations with firms' productivity. Capital shows a positive influence on firms' productivity, with a higher production coefficient. Moreover, the difference in GMM results between local and imported materials shows a positive influence on firms' productivity. Imported materials, on the other hand, show higher output, putting upward pressure on firm productivity. In contrast, fuel has a positive impact on firm productivity. It draws due attention to some key areas in which policy promotes industrial linkage and manufacturing competitive products and that promotes electric infrastructural development.