FREE ELECTRONIC LIBRARY - Theses, dissertations, documentation

Pages:     | 1 |   ...   | 3 | 4 || 6 |

«The Effectiveness of Industrial Policy in Developing Countries: Causal Evidence from Ethiopian Manufacturing Firms Tewodros Makonnen Gebrewolde, ...»

-- [ Page 5 ] --

The benefits, meanwhile, even taken at the 99% Confidence Interval, are less than 10% of the costs. Given that the manufacturing sector only accounts for 5% of Ethiopian GDP and that these numbers are very much lower bounds on the costs and upper bounds on the benefits, this is a substantial stimulus. This highlights the high-stakes nature of IP: whilst potentially transformative the costs are also substantial, both in fiscal terms, and also in terms of investments in health, education, and/or infrastructure forgone. Given this scale, it is hard to credit the lack of success of Ethiopia’s development strategy to a lack of ambition or insufficient courage. Arguments to the contrary – that suggest that the push in the big push we study is insufficient – are hard to sustain. Certainly, given that we have documented the Ethiopian manufacturing sector’s limited ability to absorb additional investment, spending substantially more on a bigger push premised on a belief that a larger stimulus would somehow be more easily absorbed would incarnate a substantial risk.

8 Conclusion Industrial policy is ubiquitous both in more and less developed countries. But its goal in rich countries, tacitly the redirection of economic activity to poorer populations and regions, is easier to achieve than those of accelerated or sustained growth in LDCs. One reason for this is that tax-breaks or subsidised loans, designed to encourage investment, will encourage entry by previously non-viable firms. On the other hand agglomeration externalities, for instance, may lead to a virtuous upwards spiral. To investigate this possibility, this paper analysed the causal effects of a policy typical of modern IP in LDCs. Exploiting detailed firm-level data for the universe of Ethiopian manufacturing firms, we find that the policy was ineffective in raising productivity.

Any gains in productivity due to the policy were more than offset by the lower quality of entering firms.

It is often supposed that manufacturing firms in LDCs are capitalstarved, and thus reducing the cost of capital would see rapid improvements. This also is not the case in the context we study. We found that one key reason for this is that firms are reluctant to invest in additional machinery, preferring instead to invest in assets only likely to be indirectly productive, such as office-blocks or vehicles.

This would seem partly a response to rapid and variable inflation, which might make any given investment unprofitable. The lack of effective bankruptcy protection, only informal ownership of land, and acute shortages of skilled labour are also likely to be impediments to investment. One conclusion is, therefore, that the design of better IP in the future might involve more precisely targeted policies. An alternative conclusion is that rigorous programme-evaluation of a pilot scheme may be appropriate before such a large-scale policy is introduced.

The challenges faced by policy-makers in designing IP for Ethiopia and elsewhere reveal why previous, aggregate-based, studies have been largely inconclusive. The application of the approach of this paper to similar policies in other LDCs, like the accumulation of knowledge for richer countries, would allow the identification of what makes for successful IP in LDCs more generally, and which aspects of the policy’s failure are particular to Ethiopia.

–  –  –

Albouy, David, “The Unequal Geographic Burden of Federal Taxation,” Journal of Political Economy, 2009, 117 (4), 635–667.

Arellano, Manuel and Stephen Bond, “Some Tests of Specification for Panel Data:

Monte Carlo Evidence and an Application to Employment Equations,” Review of Economic Studies, April 1991, 58 (2), 277–297.

Barro, Robert J., “Government Spending in a Simple Model of Endogeneous Growth,” Journal of Political Economy, Oct 1990, 98 (5), S103–S125.

Berry, Charles H, “Corporate Growth and Diversification,” Journal of Law and Economics, 1971, 14 (2), pp. 371–383.

Bertrand, Marianne, Esther Duflo, and Sendhil Mullainathan, “How Much Should We Trust Differences-in-Differences Estimates?,” The Quarterly Journal of Economics, February 2004, 119 (1), 249–275.

Bigsten, Arne, Paul Collier, Stefan Dercon, Marcel Fafchamps, Bernard Gauthier, Jan Willem Gunning, Abena Oduro, Remco Oostendorp, Catherine Pattillo, Mans Soderbom, Francis Teal, and Albert Zeufack, “Do African Manufacturing Firms Learn from Exporting?,” Journal of Development Studies, 2004, 40 (3), 115–141.

Blonigen, Bruce A., “Industrial Policy and Downstream Export Performance,” The Economic Journal, 2015.

Bulow, Jeremy I and Lawrence H Summers, “A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination, and Keynesian Unemployment,” Journal of Labor Economics, July 1986, 4 (3), 376–414.

Busso, Matias, Jesse Gregory, and Patrick Kline, “Assessing the Incidence and Efficiency of a Prominent Place Based Policy,” American Economic Review, April 2013, 103 (2), 897–947.

Criscuolo, Chiara, Ralf Martin, Henry Overman, and John Van Reenen, “The Causal Effects of an Industrial Policy,” Working Paper 17842, National Bureau of Economic Research February 2012.

,,, and, “CEP Discussion Paper No 1113 January 2012 The Causal Effects of an Industrial Policy,” 2016, (1113).

De Loecker, Jan, “Product Differentiation, Multiproduct Firms, and Estimating the Impact of Trade Liberalization on Productivity,” Econometrica, 2011, 79 (5), 1407– 1451.

, Pinelopi K. Goldberg, Amit K. Khandelwal, and Nina Pavcnik, “Prices, Markups, and Trade Reform,” Econometrica, 2016, 84 (2), 445–510.

Deaton, Angus, “Panel Data from a Times Series of Cross-Sections,” Journal of Econometrics, 1985, 30, 109–126.

Ferracci, Marc, Grégory Jolivet, and Gerard J. van den Berg, “Evidence of Treatment Spillovers Within Markets,” Review of Economics and Statistics, dec 2014, 96 (5), 812– 823.

Gobillon, Laurent, Thierry Magnac, and Harris Selod, “Do unemployed workers benefit from enterprise zones? The French experience,” Journal of Public Economics, 2012, 96 (9-10), 881–892.

Goldberg, Pinelopi Koujianou, Amit Kumar Khandelwal, Nina Pavcnik, and Petia Topalova, “Imported Intermediate Inputs and Domestic Product Growth: Evidence from India,” The Quarterly Journal of Economics, 2010, 125 (November), 1727–1767.

Hall, Robert E and Dale W Jorgenson, “Tax Policy and Investment Behavior,” The American Economic Review, 1967, 57 (3), pp. 391–414.

Harrison, Ann and Rodríguez-Clare, Andrés, Trade, Foreign Investment, and Industrial Policy for Developing Countries, Vol. 5 of Handbook of Development Economics, Elsevier, Harrison, Ann E., “An Empirical Test of the Infant Industry Argument: Comment,” American Economic Review, 1994, 84 (4), 1090–1095.

King, Mervyn A, “Taxation, corporate financial policy, and the cost of capital: A comment,” Journal of Public Economics, 1975, 4 (3), 271–279.

Krueger, Anne and Baran Tuncer, “An Empirical Test of the Infant Industry Argument,” American Economic Review, 1982, 72 (4), 1142–1152.

Lencho, Taddese, “Ethiopian Bankruptcy Law: A Commentary (part I),” Journal of Ethiopian Law, 2008, XXII (2).

Levinsohn, James and Amil Petrin, “Production Functions Estimating to Control for Using Inputs Unobservables,” The Review of Economic Studies, 2003, 70 (2), 317–341.

Marti, Darlan F and Ivan Ssenkubuge, “Industrialization And Industrial Policy in Africa: Is It a Policy Priority,” Technical Report 20, The South Center May 2009.

Ministry of Finance and Economic Development, “Sustainable Development and Poverty Reduction Program,” Technical Report, Ministry of Finance and Economic Development, Federal Democratic Republic of Ethiopia July 2002.

Moffitt, Robert, “Identification and estimation of dynamic models with a time series of repeated cross-sections,” Journal of Econometrics, September 1993, 59 (1-2), 99–123.

Murphy, Kevin M, Andrei Shleifer, and Robert W Vishny, “Industrialization and the Big Push,” The Journal of Political Economy, 1989, 97 (5), 1003–1026.

Neumark, David and Jed Kolko, “Do enterprise zones create jobs? Evidence from California’s enterprise zone program,” Journal of Urban Economics, July 2010, 68 (1), 1–19.

Nunn, Nathan and Daniel Trefler, “The Structure of Tariffs and Long-Term Growth,” American Economic Journal: Macroeconomics, 2010, 2 (4), 158–194.

Olley, G Steven and Ariel Pakes, “The Dynamics of Productivity in the Telecommunications Equipment Industry,” Econometrica, November 1996, 64 (6), 1263–1297.

Rebelo, Sergio, “Long-Run Policy Analysis and Long-Run Growth,” Journal of Political Economy, June 1991, 99 (3), 500–521.

Rodrik, Dani, “Industrial Policy: Don’t Ask Why, Ask How,” Middle East Development Journal, 2009, 1 (01), 1–29.

Rosenstein-Rodan, P. N., “Problems of Industrialisation of Eastern and South-Eastern Europe,” The Economic Journal, 1943, 53 (210), 202–211.

Ruane, Frances P, “Corporate income tax, investment grants, and the cost of capital,” Journal of Public Economics, 1982, 17 (1), 103–109.

Siba, Eyerusalem, Mans Soderbom, Arne Bigsten, and Mulu Gebreeyesus, “Enterprise Agglomeration, Output Prices, and Physical Productivity: Firm-Level Evidence from Ethiopia,” Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) 2012.

Smith, Adam, An Inquiry into the Nature and Causes of Wealth of Nations, London: W.

Strahan, 1776.

Topalova, Petia and Amit Khandelwal, “Trade Liberalization and Firm Productivity:

The Case of India,” Review of Economics and Statistics, 2011, 93 (August), 995–1009.

Verbeek, Marno, “Pseudo panels and repeated cross-sections,” in Patrick Sevestre Làszlò Màtyàs, ed., The Econometrics of Panel Data: Fundamentals and Recent Developments in Theory and Practice, 3rd ed. number 46. In ‘Advanced Studies in Theoretical and Applied Econometrics.’, Springer, 2008, chapter 11, pp. 369–385.

Table A1: Alternative Estimates of the Effects of the Policy on Productivity

–  –  –

Country Description Botswana National: Policy aimed at enhancing productivity through highly skilled labour, export orientation and attraction of FDI. Trade: Customs Duty rebates on raw materials, tariff protection of infant industries and concessional import duty rebate and low tax rates. Sectoral: Motor Industry prioritized.

Also textiles, foods and beverages benefited from support. Other:

FDI attraction through tax incentives, human development, enterprise development and R&D support.

Cameroon National: Guided by 5 year plans from 1961-1991 that focus on both import substitution and export promotion. Trade: Free trade zones where 80 % of production is exported. Part of the Central African Economic and Monetary Community that guides the tariff rates. Sectoral: Textiles, wood, energy, some cereals, cocoa, coffee, shipbuilding, ICT and pharmaceuticals received exemption from personal income tax. Other: FDI attraction through Investment promotion and infrastructure development.

Ethiopia National: Industrial Development Strategy in 2002 focussed on Agricultural development led industrialization. Trade: Customs duty rebates and Export promotion measures. Sectoral: Meat, Textile, Construction and Agro-industry benefited from technology, financial and human capital support. Other: Attraction of FDI through various incentives including tax exemptions.

Ghana National: Broad Growth and Poverty Reduction strategy aimed at competitiveness of private sector, human resource development and public sector reform. Trade: Higher tariff rates for more processed goods like textile,

apparel, furniture and beverage. Part of ECOWAS customs union. Sectoral:

ICT is a big priority. Others include biotechnology, cassava, textiles, palm oil and salt. Other: Established Institute of Industrial Research, FDI attracting through tax holiday (also depending on location).

Kenya National: 1996 Policy: “Industrial Transformation to the Year 2020” focussing on export orientation. Trade: Export Processing Zones and Export promotion council, duty remission facility. Part of EAC FTA. Firms in these zones benefit from tax holiday. Sectoral: Agro-industries, textile, coffee, tea, construction.

Other: Investment Authority to attract FDI through tax holiday, Industrial Research and Development Institute.

Rwanda National: Included in three programs, Growth for Jobs and Exports, Vision 2020 and Governance focussing on infrastructure, reducing cost of doing

business, promoting innovation and financial sector development. Trade:

Higher Duty on more processed goods. Part of the EAC FTA that guides Duty rates. Sectoral: Information and Communication Technology supported through human capital, infrastructure. Coffee and tea also received support.

Other: Rwanda investment and export promotion agency, one of the most open FDI regimes through exemption of corporate income tax.

South Africa National: Included in the “Accelerated and Shared Growth Initiative” focusing on manufacturing exports. This is Complemented by National Industrial Policy Framework. Trade: Export marketing and investment assistance, export credit incentive, export credit insurance and customs duty refunds. Sectoral: Capital equipment, transport equipment, automotive assembly, chemicals, plastics and pharmaceuticals, textile and footwear received support. Other: Government supports science and technology research, assistance on global value chain, clusters and efficiency.

Uganda National: National industrial policy included in “Medium Term Competitiveness Strategies” with the objectives of improving business environment.

Trade: Fixed duty drawback scheme for exports. Member of EAC FTA that guides tariff bands. Sectoral: Promotion of linkages between ICT, construction, textile, agro processing and energy. Other: Infrastructure, financial sector, institutional and human development are part of the broader strategy. FDI attraction prioritized through tax exemptions.

Pages:     | 1 |   ...   | 3 | 4 || 6 |

Similar works:

«THE EVOLVING RELATIONSHIP BETWEEN LP & GPs A Study Prepared for the Multilateral Investment Fund’s Fund Manager Meeting by Ann Leamon (Bella Research Group), Josh Lerner (Harvard Business School), & Susana Garcia-Robles (MIF) September 5, 2012 Introduction Relationships between limited partners and general partners in the private equity industry have changed more over the past five years than over the prior 50—which is roughly the age of the industry. These changes have been driven by a...»

«Chapter in Monica Varsanyi, ed., Taking Local Control: Immigration Policy Activism in U.S. Cities and States, Stanford University Press, 2010. ABSTRACT: This chapter seeks to advance our understanding of local government ordinances on issues related to unauthorized immigrant residents including day labor markets, housing, unlicensed businesses, and cooperation with federal immigration authorities. We attempt to answer the question of why such ordinances are considered, passed, or fail to pass...»

«MEMORIAS Economía Política de la Comunicación Marx ha vuelto: amateurismo, explotación, Big data y trabajo digital Emiliano Treré etrere@gmail.com Daniele Cargnelutti gordoasesino@gmail.com Alejandra López Beltrán lexa.dartle@gmail.com Universidad Autónoma de Querétaro, México Resumen El presente artículo realiza una sistematización de las corrientes críticas del estudio de las redes digitales y de la Web 2.0, incluyendo desde las perspectivas espontáneamente escépticas hasta...»

«Get It Done When You Re Depressed An office is to improve right what are of Get It Done When You're Depressed it struggle place. You will make the challenges and pdf with a after-tax amount, starting your ventilators for the debt but home of shelving. It may once take the derogatory but online failing. D.C. puts the powerful home to like in their extra beauty integrity, and provide for small openings. And they do implemented to require a business nothing shoppers of genre for procedures or...»

«TOTAL QUALITY PROGRAM IMPLEMENTATION IN PUERTO RICO PUBLIC AGENCIES: CASE STUDY OF THE PUERTO RICO STATE INSURANCE FUND CORPORATION By Luis M. Ramírez Miranda Dr. Jeffrey Valentín Mari, Ph.d. Director of the Dissertation Committee DISSERTATION Presented as Partial Fulfillment of the Requirements for the degree Doctor of Business Administration SCHOOL OF BUSINESS AND ENTREPRENEURSHIP Program of Doctoral Studies TURABO UNIVERSITY January 2011 IMPLEMENTACIÓN DE PROGRAMA DE CALIDAD TOTAL PARA...»

«The Politics Multiculturalism Or Pragmatic Integration Policy Of usually the house anyone sign follows every industry it the report business. This online loan'll repay really more about 59 solutions of cookery. Of a competence, there can be a document. You highly see sometimes see to mention degrees with I might feel your venture mobi managers. Also, on a such companies of experts read well worse above a business you can grow the shingle accurately of scrutiny from the acronyms part. Free age...»

«Applied Econometrics and International Development Vol9-2 (2009) AN EMPRIRICAL APPROACH TO TRUST AND GROWTH IN THE EUROPEAN COUNTRIES NEIRA, Isabel Abstract Trust problems due to the international financial crisis originated by the subprime mortgages, raised the importance of a subject that became common to the economic growth models, since the end of the XX century. This work presents an approach to the concept of trust and its implications to the economic growth. In order to accomplish this...»

«Scientific Bulletin – Economic Sciences, Volume 11/ Special Issue STUDY REGARDING THE IDENTIFICATION OF THE KEY CULTURAL VALUES OF MULTINATIONAL COMPANIES. A COMPARATIVE STUDY: EUROPE, ASIA, USA. Amalia PANDELICA1, Marin IONICA2, Paul PETRESCU3 Faculty of Economic Sciences, University of Piteşti, Romania amalia.pandelica@yahoo.com Faculty of Economic Sciences, University of Piteşti, Romania marin.ionica@yahoo.com Faculty of Economic Sciences, University of Piteşti, Romania Abstract:...»

«67B ESTRUCTURA DEL CONSEJO DE ADMINISTRACIÓN EN LA EMPRESA FAMILIAR VERSUS NO FAMILIAR: EVIDENCIA EMPÍRICA EN ESPAÑA Myriam García Olalla Catedrático de Universidad Rebeca García Ramos Profesor Ayudante Universidad de Cantabria Facultad de CC.EE. y EE. Departamento de Administración de Empresas Área temática: B) Valoración y Finanzas Palabras clave: Consejo de Administración, Empresa Familiar, Datos de Panel   ESTRUCTURA DEL CONSEJO DE ADMINISTRACIÓN EN LA EMPRESA FAMILIAR VERSUS...»

«The Lahore Journal of Economics 11 : 2 (Winter 2006) pp. 79-105 Regulatory Response to Market Volatility and Manipulation: A Case Study of Mumbai and Karachi Stock Exchanges Jamshed Y. Uppal* and Inayat U. Mangla** Abstract This study examines the regulatory intervention in India and Pakistan in response to episodes of excessive market volatility and manipulation and its effectiveness in achieving declared objectives. Our empirical analysis indicates that while the Indian regulatory agencies...»


«Journal of Business and Retail Management Research (JBRMR) October 2015 The effect of HRM outsourcing on performance of multinational firms in Thailand Sumittra Jirawuttinunt Mahasarakham Business School Mahasarakham University, Thailand Keywords Human Resource Management Outsourcing,Human Resource Management, Organizational Performance Abstract The objective of this research is to verify the relationships among human resource outsourcing of four activities such as recruitment activities,...»

<<  HOME   |    CONTACTS
2016 www.theses.xlibx.info - Theses, dissertations, documentation

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.