Good Business Practices Improve Productivity in Myanmar’s Manufacturing Sector

Abstract

We investigate the relationship between business practices and enterprise productivity using panel data with matched employer and employee information from Myanmar. The data show that micro, small, and medium-sized manufacturing enterprises in Myanmar typically adopt only a few modern business practices, and the persistence in the use is extremely low. Even so, we find a positive and economically important association between business practices and productivity. Specifically, the empirical results show that a one standard deviation difference in applied business practices (equivalent to applying an additional 4 to 5 of the 20 business practices in focus) is associated with an 8–10 per cent difference in labour productivity. Utilising the employer–employee information to estimate Mincer-type wage regressions, we find that workers receive about half to two-thirds of the productivity gain in higher wages. Overall, our findings support the notion of business practices as a production technology, and we find that workers and managers split the productivity gains evenly.