Abstract
This study investigates the effect of energy use on labor productivity in the Ethiopian manufacturing industry. It uses panel data for the manufacturing industry groups to estimate the coefficients using the dynamic panel estimator. The study’s results confirm that energy use increases manufacturing labor productivity. The coefficients for the control variables are in keeping with theoretical predictions. Capital positively augments productivity in the industries. Based on our results, technology induces manufacturing’s labor productivity. Likewise, more labor employment induces labor productivity due to the dominance of labor-intensive manufacturing industries in Ethiopia. Alternative model specifications provide evidence of a robust link between energy and labor productivity in the Ethiopian manufacturing industry. Our results imply that there needs to be more focus on the efficient use of energy, labor, capital, and technology to increase the manufacturing industry’s labor productivity and to overcome the premature deindustrialization patterns being seen in Ethiopia.
Highlights
Industrial expansion is essential for socioeconomic development as it generates different opportunities—capital accumulation, structural changes, technological innovations, and productivity—that improve economic performance [1,2,3]
If one is interested in the scale effects of energy and capital use on labor productivity, the right-hand side of the equation to include all inputs in the original form per labor, while the left side is measured as productivity—that is, output is divided by labor
The data contains 15 industry groups listed in Table 1 and all of them are included in the analysis
Summary
Industrial expansion is essential for socioeconomic development as it generates different opportunities—capital accumulation, structural changes, technological innovations, and productivity—that improve economic performance [1,2,3]. Different factors are attributed to industrial growth and productivity, including human or physical capital, labor, energy, innovations, and capacity utilization [3,7,8]. The estimation results confirm that energy use positively effects labor productivity in the manufacturing sector in Ethiopia. This implies that the efficient use of energy is a pillar of labor productivity in the Ethiopian manufacturing industry. This study adds to the existing literature by empirically confirming the relationship between energy use and labor productivity across different model specifications. The final section gives the conclusion and the implications of the findings
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