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The granularity of the manufacturing sector : insights from a developing economy

Author

Listed:
  • Elguellab Ali

    (University Mohamed 5)

  • Ezzahid Elhadj

    (University Mohamed 5)

Abstract

The paper examines the granularity of the manufacturing sector as a key determinant of aggregate productivity in the context of a developing economy. We investigate this hypothesis in the case of Morocco, an economy that has yet to rich the emergent market status. Our findings support that the large firms are significant drivers of fluctuations within the manufacturing sector, thereby lending support to the notion that concentration, brought about by high entry costs and institutional constraints, has far-reaching consequences. Specifically, idiosyncratic shocks, experienced by large firms, explain more than one-third of the aggregate volatility in the sector. Our robustness checks lend credence that firm-level shocks are idiosyncratic and serve as valuable predictors of fluctuations within the manufacturing sector.

Suggested Citation

  • Elguellab Ali & Ezzahid Elhadj, 2023. "The granularity of the manufacturing sector : insights from a developing economy," Economics Bulletin, AccessEcon, vol. 43(3), pages 1254-1264.
    • Handle: RePEc:ebl:ecbull:eb-23-00178
    as

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    References listed on IDEAS

    as
    1. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
    2. del Rosal, Ignacio, 2013. "The granular hypothesis in EU country exports," Economics Letters, Elsevier, vol. 120(3), pages 433-436.
    3. Fornaro, Paolo & Luomaranta, Henri, 2018. "Aggregate fluctuations and the effect of large corporations: Evidence from Finnish monthly data," Economic Modelling, Elsevier, vol. 70(C), pages 245-258.
    4. Xavier Gabaix, 2011. "The Granular Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 79(3), pages 733-772, May.
    5. Mr. Christian H Ebeke & Kodjovi M. Eklou, 2017. "The Granular Origins of Macroeconomic Fluctuations in Europe," IMF Working Papers 2017/229, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Idiosyncratic shocks; Granularity; Business cycle; productivity; Power-law distribution; concentration;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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