The relationship among enterprise clustering, prices, and productivity in Ethiopia's manufacturing sector

E. Siba, M. Soderbom*, A. Bigsten, M. Gebreeyesus

*Corresponding author for this work

    Research output: Contribution to journalArticleAcademicpeer-review

    Abstract

    We use census panel data on Ethiopian manufacturing firms to analyze how enterprise clustering in local markets covaries with firm-level output prices and physical productivity. We find a negative and statistically significant relationship between the density of firms that produce a given product in a given location and the local price of that product. We also find a positive and statistically significant relationship between the density of firms that produce a given product in a location and the physical productivity of same-product firms in the location. These results are consistent with the notion that increased clustering of firms generates higher competitive pressure and positive externalities. Across firms that produce different products, we find no statistically significant relationship between enterprise clustering and firm-level output prices and productivity. We also find no clustering effects across towns. Our results suggest that while clustering can impact firm performance, the advantages are narrow in scope.

    Original languageEnglish
    Pages (from-to)831-854
    Number of pages24
    JournalReview of Development Economics
    Volume24
    Issue number3
    DOIs
    Publication statusPublished - 1 Aug 2020

    JEL classifications

    • o00 - Economic Development, Technological Change, and Growth

    Keywords

    • african manufacturing
    • agglomeration economics
    • competition
    • efficiency
    • ethiopia
    • externalities
    • firms
    • growth
    • innovation
    • prices
    • productivity
    • size
    • turnover
    • TURNOVER
    • SIZE
    • FIRMS
    • INNOVATION
    • EXTERNALITIES
    • African manufacturing
    • COMPETITION
    • GROWTH
    • EFFICIENCY
    • Ethiopia

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