Total factor productivity in the Ethiopian Manufacturing Sector: Extent and trend

Cognizant of the importance of total factor productivity growth in the process of industrialization, examining its trend and extent in the Ethiopian manufacturing sector is essential. To this end, this paper employs different statistical and econometric models. Three main findings emerged from this exercise. Firstly, the Ethiopian manufacturing sector as a whole registered negative total factor productivity growth. Secondly, however, there were sub-sector differences: sectors that are light and had long production experience recorded positive total factor productivity growth, while others did not finally, the private sector, in general, appeared to be more efficient in resource use than the public ones. These results have relevant implications for industrialization in Ethiopia. Not only should firms build the necessary technological and managerial capabilities, but should also introduce the necessary mechanisms for adapting, assimilating and modifying them with local conditions. In parallel, the government should create the necessary conducive environment by putting in place the appropriate, incentive structure and institutions.