Exports and firm-level efficiency in African manufacturing.
ABSTRACT ABSTRACT: In this paper, we use firm-level panel data for the manufacturing sector in four African countries to estimate the effect of exporting on efficiency. Measures of firm-level efficiency using stochastic production frontier models are constructed for the period 1992 to 1995. We find that there are large efficiency gains from exporting both in terms of levels and growth, and contrary to China, the gains are largest for the new entrants to exporting. We control for unobserved heterogeneity using a dynamic model with correlated random effects. Results are robust and consistently, we find evidence of a learning-by-exporting effect as well as self-selection of the most efficient firms into exporting. The effect of exporting on efficiency appears to be larger in this African sample than in comparable studies of other regions which is consistent with the smaller size of domestic markets.
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ABSTRACT: Purpose – This paper aims to investigate firm-level interactions between productivity and exporting in Uganda's manufacturing sector. Design/methodology/approach – The paper empirically tested two hypotheses that relate to the dynamic gains from trade and also have tended to dominate the literature; self-selection and learning-by-exporting hypotheses. It employs proxies of self-selection and learning-by-exporting obtained from indices of path dependence to fit maximum likelihood estimates of export behavior. Findings – The results provide support for both hypotheses and it is also found that more experienced exporters reap more productivity gains from learning effects which is in line with the view that knowledge spillovers to exporting firms increase with the level of interaction in the global market place. Thus, learning-by-exporting is not a “short term” occurrence which takes place only in the first few years of entry in export markets after which it would fizzle out as a firm's exporting experience increases but rather, it is a cumulative process. Practical implications – This paper generates a number of insights that can guide policy makers in designing policies to promote firm productivity growth that is an engine of growth in the private sector and by extension, would fuel up overall economic growth and poverty reduction. Originality/value – Previous studies on exports and growth in Uganda have been basically focused on macro-data analysis; yet, promoting rapid expansion of manufactured exports may require more than just a good macroeconomic policy environment. This study fills the research gap by relating firm-level productivity performance to the microeconomic environment in which manufacturing firms operate.African Journal of Economic and Management Studies. 09/2011; 2(2):220-242.