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Gradual Trade Liberalization and Firm Performance in Ethiopia

Author

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  • Arne Bigsten
  • Mulu Gebreeyesus
  • Måns Söderbom

Abstract

We use firm-level data for the Ethiopian manufacturing sector matched with commodity- level data on tariffs to examine the effect of trade liberalization on firm performance during the 1997-2005 period. We find relatively large positive effects of tariff reductions on total factor productivity, a result that is robust to treating tariffs as endogenous, and to various generalizations of the baseline model. This affects is primarily driven by mechanisms operating at high tariff level, suggesting that excessive tariff levels may be particularly distortionary. We find some evidence that the reduction of tariffs has resulted in smaller and more capital-intensive domestic firms. We note that these effects are consistent with the hypothesis that the trade liberalization has increased competition in the domestic market. We find no significant effect of the trade liberalization on entry or exit rates.

Suggested Citation

  • Arne Bigsten & Mulu Gebreeyesus & Måns Söderbom, 2009. "Gradual Trade Liberalization and Firm Performance in Ethiopia," CSAE Working Paper Series 2009-21, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2009-21
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    Citations

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    Cited by:

    1. Haile, Getinet Astatike & Srour, Ilina & Vivarelli, Marco, 2013. "The Impact of Globalization and Technology Transfer on Manufacturing Employment and Skills in Ethiopia," IZA Discussion Papers 7820, Institute of Labor Economics (IZA).
    2. Tasew Tadesse & Jaswinder Singh Brar, 2016. "Sources of Ethiopia’s Export Growth: a Constant Market Shares Decomposition Analysis," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 2(3), pages 74-95, September.
    3. Toritseju Rita Pessu & Fredrick Agboma, 2018. "Dwarfed Giant: Impact of Trade and Related Policies on SMEs in the Nigerian Textile Industry," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(6), pages 602-629, June.
    4. Tsehay, Solomon & Adane, Zewdie & Feto, Adem, 2022. "Agriculture-Industry Linkages for Employment and Economic Transformation in Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 31(01), April.
    5. World Bank Group, 2015. "Ethiopia’s Great Run," World Bank Publications - Reports 23333, The World Bank Group.
    6. Getinet Haile & Ilina Srour & Marco Vivarelli, 2017. "Imported technology and manufacturing employment in Ethiopia," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 7(1), pages 1-23, April.
    7. Haile, Getinet & Srour, Ilina & Vivarelli, Marco, 2017. "Globalization, Technological Change and Skills: Evidence from Ethiopia," GLO Discussion Paper Series 16, Global Labor Organization (GLO).
    8. Yismaw Ayelign & Lakhwinder Singh, 2019. "Comparison of Recent Developments in Productivity Estimation: Application on Ethiopian Manufacturing Sector," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 5(3), pages 20-31, September.
    9. Getinet Haile & Ilina Srour & Marco Vivarelli, 2014. "Globalization and Technology Transfer in Ethiopia: Their Impact on Domestic Employment and Skills," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1498, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    10. Hoedoafia, Mabel Akosua, 2020. "On the Link between Trade Liberalization and Firm Productivity: Panel Data Evidence from Private Firms in Ghana," MPRA Paper 99568, University Library of Munich, Germany.
    11. Alem, Yonas & Söderbom, Måns, 2012. "Household-Level Consumption in Urban Ethiopia: The Effects of a Large Food Price Shock," World Development, Elsevier, vol. 40(1), pages 146-162.

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