Market Size, Sunk Costs of Entry, and Transport Costs : An Empirical Evaluation of the Impact of Demand-Side Factors versus Supply-Side Factors on Manufacturing Productivity

Market Size, Sunk Costs of Entry, and Transport Costs : An Empirical Evaluation of the Impact of Demand-Side Factors versus Supply-Side Factors on Manufacturing Productivity

This paper uses plant-level, panel data from the Ethiopian manufacturing census to estimate the effects of demand-side and supply-side factors on industrywide aggregate productivity. The paper focuses on the effects of three factors: (1) local mark...

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Main Authors: Jones, Patricia, Lartey, Emmanuel, Mengistae, Taye, Zeufack, Albert
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2019
Subjects:
MANUFACTURING
INDUSTRIALIZATION
MICROECONOMIC ANALYSES
TRANSPORTATION COST
FIRM ENTRY
Online Access:http://documents.worldbank.org/curated/en/732571560169924956/Market-Size-Sunk-Costs-of-Entry-and-Transport-Costs-An-Empirical-Evaluation-of-the-Impact-of-Demand-Side-Factors-versus-Supply-Side-Factors-on-Manufacturing-Productivity
http://hdl.handle.net/10986/31865
id okr-10986-31865
recordtype oai_dc
spelling okr-10986-318652022-09-19T12:16:20Z Market Size, Sunk Costs of Entry, and Transport Costs : An Empirical Evaluation of the Impact of Demand-Side Factors versus Supply-Side Factors on Manufacturing Productivity Jones, Patricia Lartey, Emmanuel Mengistae, Taye Zeufack, Albert MANUFACTURING INDUSTRIALIZATION MICROECONOMIC ANALYSES TRANSPORTATION COST FIRM ENTRY This paper uses plant-level, panel data from the Ethiopian manufacturing census to estimate the effects of demand-side and supply-side factors on industrywide aggregate productivity. The paper focuses on the effects of three factors: (1) local market size, (2) the value of transportation costs that firms incur in selling to customers outside their market, and (3) licensing fees needed to enter the market. Identification is based on a model of production under monopolistic competition, which enables interpreting the estimated coefficients of a reduced form, dynamic productivity equation. The paper analyzes 11 industries in Ethiopia over 2000 to 2010. Several interesting results emerge. In the most parsimonious specification, the estimated coefficients are consistent with all three predictions of the model—but only for one industry: cinder blocks. In this industry, the expansion of the local market boosts industrywide total factor revenue productivity, while increases in transport costs and licensing fees reduce it. The picture is somewhat mixed in the other 10 industries but broadly consistent with the predictions of the model. 2019-06-13T19:07:51Z 2019-06-13T19:07:51Z 2019-06 Working Paper http://documents.worldbank.org/curated/en/732571560169924956/Market-Size-Sunk-Costs-of-Entry-and-Transport-Costs-An-Empirical-Evaluation-of-the-Impact-of-Demand-Side-Factors-versus-Supply-Side-Factors-on-Manufacturing-Productivity http://hdl.handle.net/10986/31865 English Policy Research Working Paper;No. 8875 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Africa Ethiopia
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic MANUFACTURING
INDUSTRIALIZATION
MICROECONOMIC ANALYSES
TRANSPORTATION COST
FIRM ENTRY
spellingShingle MANUFACTURING
INDUSTRIALIZATION
MICROECONOMIC ANALYSES
TRANSPORTATION COST
FIRM ENTRY
Jones, Patricia
Lartey, Emmanuel
Mengistae, Taye
Zeufack, Albert
Market Size, Sunk Costs of Entry, and Transport Costs : An Empirical Evaluation of the Impact of Demand-Side Factors versus Supply-Side Factors on Manufacturing Productivity
geographic_facet Africa
Ethiopia
relation Policy Research Working Paper;No. 8875
description This paper uses plant-level, panel data from the Ethiopian manufacturing census to estimate the effects of demand-side and supply-side factors on industrywide aggregate productivity. The paper focuses on the effects of three factors: (1) local market size, (2) the value of transportation costs that firms incur in selling to customers outside their market, and (3) licensing fees needed to enter the market. Identification is based on a model of production under monopolistic competition, which enables interpreting the estimated coefficients of a reduced form, dynamic productivity equation. The paper analyzes 11 industries in Ethiopia over 2000 to 2010. Several interesting results emerge. In the most parsimonious specification, the estimated coefficients are consistent with all three predictions of the model—but only for one industry: cinder blocks. In this industry, the expansion of the local market boosts industrywide total factor revenue productivity, while increases in transport costs and licensing fees reduce it. The picture is somewhat mixed in the other 10 industries but broadly consistent with the predictions of the model.
format Working Paper
author Jones, Patricia
Lartey, Emmanuel
Mengistae, Taye
Zeufack, Albert
author_facet Jones, Patricia
Lartey, Emmanuel
Mengistae, Taye
Zeufack, Albert
author_sort Jones, Patricia
title Market Size, Sunk Costs of Entry, and Transport Costs : An Empirical Evaluation of the Impact of Demand-Side Factors versus Supply-Side Factors on Manufacturing Productivity
title_short Market Size, Sunk Costs of Entry, and Transport Costs : An Empirical Evaluation of the Impact of Demand-Side Factors versus Supply-Side Factors on Manufacturing Productivity
title_full Market Size, Sunk Costs of Entry, and Transport Costs : An Empirical Evaluation of the Impact of Demand-Side Factors versus Supply-Side Factors on Manufacturing Productivity
title_fullStr Market Size, Sunk Costs of Entry, and Transport Costs : An Empirical Evaluation of the Impact of Demand-Side Factors versus Supply-Side Factors on Manufacturing Productivity
title_full_unstemmed Market Size, Sunk Costs of Entry, and Transport Costs : An Empirical Evaluation of the Impact of Demand-Side Factors versus Supply-Side Factors on Manufacturing Productivity
title_sort market size, sunk costs of entry, and transport costs : an empirical evaluation of the impact of demand-side factors versus supply-side factors on manufacturing productivity
publisher World Bank, Washington, DC
publishDate 2019
url http://documents.worldbank.org/curated/en/732571560169924956/Market-Size-Sunk-Costs-of-Entry-and-Transport-Costs-An-Empirical-Evaluation-of-the-Impact-of-Demand-Side-Factors-versus-Supply-Side-Factors-on-Manufacturing-Productivity
http://hdl.handle.net/10986/31865
_version_ 1764475246093533184

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