AN ANALYSIS OF THE PERFORMANCE OF LARGE AND MIDDLE LEVEL MANUFACTURING INDUSTRIES: THE CASE OF ETHIOPIA (1991-2017)

Abstract

The Ethiopian economy, during the period of command economy, was the weakest in sub-Saharan Africa. However, this has showed recovery due to the new policy the country has started to follow ever since EPRDF took over power after the failure of command economic policy, which was followed by dirge regime. Nonetheless, the share of the manufacturing sector’s to GDP was still insignificant. This study analyzed the performance of manufacturing particularly the Large and Medium level manufacturing sub –sector in Ethiopia from 1961/62 to 2016/17 using the secondary data from CSA. The data provides number of labor, fixed asset employed and gross revenue and are adjusted by consumer price index deflector using the Growth accounting methodologically. The study adopted a descriptive analysis to measure partial factor productivity (productivity of labor and capital) and to give more explanation about the elasticity of the factors. The finding indicates existence of large inefficiencies that explains at least 14 percent of output variation among firms; the existence of decreasing returns to scale is an indication that firms are operating above their optimal scale (proportion of factors). From this study, it is recommended that both government and industry need to play their respective parts, with government as a facilitator and formulator of policies conducive for growth of industry and industry itself taking initiatives must include research and development, investment in to newer and more efficient technologies, improvement of existing facilities for better productivity.