Active Private Sector Development Policies Revisited: Impacts of the Ethiopian Industrial Cluster Policy

Tigabu Degu Getahun and Espen Villanger

Journal of Development Studies, 2019, vol. 55, issue 7, 1548-1564

Abstract: We analyse impacts of a cluster policy aiming to increase firm growth through maximising agglomeration benefits and improving production facilities. Firms located in a natural cluster were incentivised to move to a new government-created cluster. A limited number of firms were allowed to move, and many similar firms, also eager to move but could not, formed our comparison group. Controlling for selection, and employing difference in-difference estimation, we find large negative effects on job-creation and firm performance. The policy hampered the firms’ business and knowledge networks, reduced trust among firms, increased transaction costs and curbed market information.

Date: 2019
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DOI: 10.1080/00220388.2018.1443211

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