Productivity growth and the structure of production

In this study, interactions between potential hierarchical value chains existing in the production structure and industry-wise productivity growths are sought. We applied generalized Chenery-Watanabe heuristics for matrix linearity maximization to triangulate the input-output incidence matrix for both Japan and the Republic of Korea, finding the potential directed flow of values spanning the industrial sectors of the basic (disaggregated) industry classifications for both countries. Sector specific productivity growths were measured by way of the Trönquvist index, using the 2000-2005 linked input-output tables for both Japan and Korea.

Procyclical Productivity and Returns-to-Scale in Philippine Manufacturing

The Philippines is regarded as a highly oligopolistic economy, and it is argued that this is a cause of the relative stagnation of the economy to neighbouring East Asian economies. This presumption might be associated with increasing returns to scale and market power, which are consistent with the procyclical total factor productivity that is observed in the Philippines and the United States. However, this study found no strong evidence supporting increasing returns for aggregate manufacturing and three-digit manufacturing industries during 1956-1980 in the Philippines, based on data constructed by Hooley (1985). Further, this study does not support external effect discussed in Caballero and Lyons (1992).

Has Low Productivity Constrained Competitiveness of African Firms? : Comparison of the Firm Performances with Asian Firms

It has been argued that poor productive performance is one of critical sources of stagnation of the African manufacturing sector, but firm-level empirical supports are limited. Using the inter-regional firm data of the garment industry, technical efficiency and its contribution to competitiveness measured as unit costs were compared between Kenyan and Bangladeshi firms. Our estimates indicated that there is no significant gap in the average technical efficiency of the two industries despite conservative estimation, although unit costs greatly differ between the two industries. Higher unit cost in Kenyan firms mainly stems from high labour cost, while impact of inefficiency is quite small. Productivity accounts little for the stagnation of garment industry in several African countries.

Technology Choice, Change of Trade Structure, and A Case of Hungarian Economy

In the IT industry, there has been a remarkable increase in the demand for system LSI. A system LSI must be tailor-designed for each electrical appliance, and then produced. It is said that in recent years, this production method has made the IC cycle ambiguous. It can be sought that the choice of whether the economy pursues a development path centering on technology which is tradable or technology which is embodied in labor, depends on the historical background. In this paper, the economic background is explained in order to analyze and capture movements in the IT industry and technology. Then, an econometric model for Hungary has been constructed to estimate the effect of technological progress on the economy.

Clothing Export from sub-Saharan Africa : Impact on Poverty and Potential for Growth

Increases in clothing exports after 2000 signaled the first incidence of large-scale manufacturing exports from sub-Saharan Africa. Using firm-level information, this paper explores the potential of clothing exports for poverty reduction and further growth as seen in other low income countries. It shows that the garment exporting industries in Kenya and Madagascar have contributed poverty reduction in the short term by providing mass employment for female and less educated workers with wages beyond the poverty line. However, the long-term impact is not certain. High production costs and limited development of local firms weaken potential for further growth in the competitive world market. Upgrading of the market and improvement of efficiency are required to remain competitive for African industries, and governmental support for local participation are needed to facilitate technology transfer.

Competitiveness of the knitwear industry in Bangladesh : a study of industrial development amid global competition

This paper assesses the technical efficiency and profitability of the knitwear industry in Bangladesh taking into account the sector’s role in poverty reduction. While stochastic frontier analysis was invoked to assess technical efficiency, three alternative measures, namely the rate of return, total factor productivity and the Solow residual, were used to gauge the extent and determinants of the profitability of the industry based on firm-level data collected in 2001. The estimation results indicate the high profitability of the knitwear firms. In Bangladesh, the dynamic development of the industry has entailed great diversity in efficiency in comparison with the garment industries of other developing countries. While there is a significant scale effect in profitability and productivity, no supporting evidence was found for the positive impact on competitiveness of industrial upgrading in terms of usage of expensive machinery and vertical integration and industrial agglomeration.

Are trading partners complementary in international trade?

We use a unique dataset on trading transactions at the firm level to investigate a complementary effect in international transactions between sellers and buyers; trading transactions are more likely to be international when both sellers and buyers are large in size than when either sellers or buyers are large. Our econometric analysis provides evidence for the complementary effect between trading partners on the likelihood of international trade, which is most prominent for exports from North to South.

Location choice of multinational enterprises in China : comparison between Japan and Taiwan

This paper examines and compares the location choice of Japanese and Taiwanese MNEs in China. Furthermore, we investigate the relationship between location choice and firm characteristics, specifically firms' productivity. Due to Taiwan's linguistic and cultural advantages in China, it is expected that the location choice mechanics are different between Japanese and Taiwanese MNEs. As a result, our main findings are that, while the less productive Japanese firms prefer a location in an area with a larger agglomeration of Japanese affiliates or in an area closer to Japan, the more productive Taiwanese firms prefer a location in an area with a larger agglomeration of Taiwanese affiliates or in an area closer to Taiwan.

The role of home and host country characteristics in FDI: firm-level evidence from Japan, Korea and Taiwan

There is a large and growing empirical literature that investigates the determinants of outward foreign direct investment (FDI). This literature examines primarily the effect of host country characteristics on FDI even though home country characteristics also influence the decision of firms to invest abroad. In this paper, we examine the role of both host and home country characteristics in FDI. To do so, we constructed a firm-level database of outward FDI from Japan, Korea, and Taiwan. Our empirical analysis yields two main findings. First, host countries with better environment for FDI, in terms of larger market size, smaller fixed entry costs, and lower wages, attract more foreign investors. Second, firms from home countries with higher wages are more likely to invest abroad. An interesting and significant policy implication of our empirical evidence is that policymakers seeking to promote FDI inflows should prioritize countries with higher wages.

Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth, and wage profile under trade liberalization

The international garment trade was liberalized in 2005 following the termination of the MFA (Multifibre Arrangement) and ever since then, price competition has intensified. Employing a unique firm dataset collected by the authors, this paper examines the changes in the performance of Cambodian garment firms between 2002/03 and 2008/09. During the period concerned, frequent firm turnover led to an improvement of the industry’s productivity, and the study found that the average total-factor productivity (TFP) of new entrants was substantially higher than that of exiting firms. Furthermore, we observed that thanks to productivity growth, an improvement in workers’ welfare, including a rise in the relative wages of the low-skilled, was taking place. These industrial dynamics differ considerably from those indicated by the “race to the bottom” argument as applied to labor-intensive industrialization in low income countries.

Slow and steady wins the race : how the garment industry leads industrialization in low-income countries

This paper investigates how the garment industry escapes this vicious cycle and argues for the validity of labor-intensive industry as a starting point for full-fledged industrialization, even though it might at first seem to be a digression from the path to an innovation-led economy. By examining original firm-level data on garment-producing firms collected in 2002 and 2008 in Bangladesh, Cambodia, Kenya and Madagascar, the following conclusions are drawn: (1) low wages, though still sufficient for poverty reduction, are the main source of competitiveness in low-income countries; (2) after the successful initiation of industrialization causes wages to begin to rise, there is still a possibility for productivity enhancement; and (3) skill bias in technological progress is not yet a major factor, implying that the garment industry is still a labor-intensive industry. In sum, labor-intensive industry should not be discounted as a part of the development strategy of low-income countries.

Allocation efficiency in China : an extension of the dynamic Olley-Pakes productivity decomposition

This paper develops a quantitative measure of allocation efficiency, which is an extension of the dynamic Olley-Pakes productivity decomposition proposed by Melitz and Polanec (2015). The extended measure enables the simultaneous capture of the degree of misallocation within a group and between groups and parallel to capturing the contribution of entering and exiting firms to aggregate productivity growth. This measure empirically assesses the degree of misallocation in China using manufacturing firm-level data from 2004 to 2007. Misallocation among industrial sectors has been found to increase over time, and allocation efficiency within an industry has been found to worsen in industries that use more capital and have firms with relatively higher state-owned market shares. Allocation efficiency among three ownership sectors (state-owned, domestic private, and foreign sectors) tends to improve in industries wherein the market share moves from a less-productive state-owned sector to a more productive private sector.

Economic impact of political protests (strikes) on manufacturing firms : evidence from Bangladesh

Political protests in the form of strikes, locally known as hartal, remain quite common in the Indian subcontinent countries. Such a form of protests is associated with mass movement, intended to cause a total shutdown of economic activities and often results in coercion, violence, and damage to both public and private properties. Utilizing the World Bank Enterprise survey data of 2007 and 2013 of Bangladesh, this study examines the impacts of hartals on manufacturing firms. We find that political protests significantly increase costs for firms. Using flexible cost function based on factor analysis we see that the factor-neutral effect of strikes is positive and statistically significant, showing evidence of a reduction in firm productivity due to hartals. However, we did not find any evidence for systematic factor re-optimization by firms – in response to political strikes – suggesting that firms do not reallocate factor shares to tackle uncertain and irregular shocks like hartals.