Imported inputs and firm productivity: does foreign ownership matter?

Eyayu Tesfaye Mulugeta () and Måns Söderbom ()
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Eyayu Tesfaye Mulugeta: Addis Ababa University
Måns Söderbom: University of Gothenburg

International Economics and Economic Policy, 2024, vol. 21, issue 3, No 6, 685-704

Abstract: Abstract This paper provides evidence on whether the relationship between imported inputs and productivity in Ethiopia depends on foreign ownership. The study uses a nationally representative firm-level unbalanced panel dataset for the period 1996–2016. Methodologically, this paper adopts two complementary empirical approaches: the Gandhi, Navarro, and Rivers (2020; henceforth GNR) two-step approach for estimating the gross output production function and the system GMM approach for estimating the gross output production function. Our results indicate that the use of imported inputs enhances productivity among manufacturing firms with foreign ownership. For domestically owned firms, the effect of imported inputs is relatively small and marginally significant. We thus find evidence that foreign-owned firms have a premium in terms of productivity gains from the use of imported inputs, compared to domestically owned firms. Our results suggest that reducing trade barriers for imported inputs will benefit foreign-owned firms more than domestically owned firms.

Keywords: Trade; Foreign ownership; Firm productivity; GNR; Translog; Ethiopia (search for similar items in EconPapers)
JEL-codes: D22 D24 F14 F61 L60 O12 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10368-024-00618-8

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