Manufacturing Value Added Research Articles

Contribution of Agricultural Productivity to Industrialization in Africa

Purpose: The objective of this study is to investigate the direct and indirect effects of agricultural productivity on industrialization. It also looks for the mediating role of infrastructural development on the effects of agricultural productivity on industrialization. Method: The system Generalized Method of Moments (GMM) methodology for 45 African countries is applied. It covers the period from 2005 to 2022. Results: The results show that agricultural productivity has a positive significant role on industrialization in Africa. This result is robust when industrialization is measured by employment in industry (EMIND). Infrastructural development has an enhancing role on the agricultural productivity-industrialization nexus. These results are robust for the two different measures of industrialization but are more enhancing on Employment in Industry than on Manufacturing Value Added (MVA). The study also observes that agricultural productivity interacts with the Water and Sanitation Index (WSS) on MVA to yield a positive net effect. Moreover, agricultural productivity interacts with ICT (Information and Communication Technology) and ECI (Electricity composite index) on both MVA and EMIND to yield positive synergy effects. Implications: The Electricity Composite Index is still not sufficient in Africa. Equally, there is a need for some countries like Chad, Ethiopia, Mozambique, and Niger to boost WSS above this threshold of 32.96 since this threshold is below the mean value for Africa as a whole. Policy-wise, it could be recommended that both agricultural productivity and infrastructural development should be strengthened, with emphasis on electricity, so as to achieve the much-needed level of industrialization for Africa.

IMPORT DEPENDENCE, VALUE ADDED AND EMPLOYMENT IN THE NIGERIAN MANUFACTURING SECTOR

This study undertakes the impact of import dependence and manufacturing sector performance in Nigeria with specific interest on the impact of imported intermediate, capital, and manufactured goods (herein referred to as import dependence) on manufacturing sector performancec indicators (such as manufacturing output growth, capacity utilization, value added, employment rate and export adopted in the study) from 1970 to 2019 utilizing a secondary data. The study adopted Augmented Dicky-Fuller (ADF) for unit root test analysis, Autoregressive Distributed Lag (ARDL) bounds test for cointegration test analysis, while, Error Correction Mechanism (ECM) was used to provide empirical evidence for the relationship between manufacturing sector performance (dependenct variable) and import dependence (independent variable). The ARDL bounds cointegration test revealed evidence of long-run relationship between manufacturing sector performance and import dependence. It was discovered from the empirical findings among others that only import of capital contributed positively to all indicators of manufacturing sector performance adopted in the study, however, import of intermdiate goods was mixed in the sense that, it contributed negatively to manufacturing average capacity utilization (MACU), manufacturing value added (MVAD), manuafcturing export (MEXP) and contributed positively to manufacturing output (MOUP) and manufacturing employment rate (MEMP). But, import of manufactured goods contributed negatively to all indicators of manufacturing sector performance adopted in the study. Based on the findings, the study recommends that government should sell off compromise of all forms and make import only for capital and partially for intermediate goods that cannot be produced domestically, while, the importation of manufacutured goods should be discouraged at all cost in Nigeria. Thus conclude that on the average Nigeria’s manufacturing sector is surrounded with doubting benefits and may not be good enough to set economic growth and developmental platform required in the economy.

Can Energy Efficiency Help in Achieving Carbon-Neutrality Pledges? A Developing Country Perspective Using Dynamic ARDL Simulations

The current research sheds light on the nexus between environmental degradation as proxied by carbon dioxide emissions (CO2), energy efficiency (EE), economic growth, manufacturing value-added (MVA), and the interaction effect of EE and MVA in India. Using yearly data from 1980 to 2019, the current study employs dynamic auto-regressive distribution lag (DARDL) simulations and Fourier Toda and Yamamoto causality techniques. The findings of DARDL reveal that as income and MVA rise, environmental quality decreases, while EE improves environmental conditions in both the long and short run. Surprisingly, the interaction term of EE and MVA has a detrimental influence on environmental quality, meaning that India remains unable to provide energy savings technologies to the manufacturing industry. Furthermore, the environmental Kuznets curve (EKC) hypothesis is well-founded for India, as the long-run income coefficient is smaller than the short-run coefficient, implying that India is in its scale stage of economy, where economic growth is prioritized over environmental quality. The results of the causality technique reveal that CO2 emissions and EE have a bidirectional association. Therefore, policymakers in India should embrace realistic industrialization strategies combined with moderate decarbonization and energy efficiency initiatives under the umbrella of sustainable industrial and economic growth.

Causes and Determinants of Manufacturing Value-added (MVA) Share Development in Ethiopia

Industrialization is not only a prerequisite for increasing an economy's competitiveness and living standards, but it is also required for developing economies to catch up to more developed. However, Ethiopia's average performance over the last four decades has been rather unsatisfactory, with MVA accounting for 5.6 % of GDP. The overarching goal of this article is to investigate the fundamental reasons why manufacturing has historically played such a minor role in Ethiopia's economy. It has also looked into the determinants factors that influence MVA. The study reviewed both theoretical and empirical literature. It used tables and figures to conduct descriptive, and the residual of the approximate Cobb-Douglas production function for total factor productivity (TFP) analyses. To estimate determinant factors, the autoregressive distributive lag (ARDL) model was used for time series data. The study identified key reasons and determinants that limit MVA share. Volatile political environments, the tendency of major fabrication subsectors to decline, TFP remaining small and stagnant, and others. According to the empirical study, in the long run, gross domestic product (GDP) per capita and foreign direct investment (FDI) variables have shown a significant positive association, whereas the real exchange rate index has a negative correlation with MVA. While, in the short run, the later variables, and manufacturing imports have a positive significant impact.. The findings have policy implications such as proper policy design and stable implementation, avoiding premature deindustrialization, improving low TFP, attracting large-scale FDI, and increasing GDP per capita income, among other things Keywords: Manufacturing Value-added; Causes; Determinants; ARDL; Ethiopia DOI: 10.7176/IEL/12-2-04 Publication date: May 31 st 2022

Manufacturing Value-Added (MVA) Share Development in Ethiopia: Causes and Determinants

Manufacturing Value-Added (MVA) Share Development in Ethiopia: Causes and Determinants

The Role of Manufacturing Sector in Economic Diversification of Nigeria (1986-2016)

It is widely accepted that an effective manufacturing sector serve as perfect tool for export diversification in developing countries. Therefore, this study investigated the role of manufacturing sector on economic diversification in Nigeria from the period of 1986-2016. In order to achieve the objective of the study, ARDL technique was employed to establish long-run relationship between diversification proxy by Theil index decomposed into Theil Total (TT), Theil Between (TB) and Theil Within (TW) and Manufacturing sector which was proxy by Manufacturing Capacity Utilization(MCU) and Manufacturing Value Added (MVA) controlled by Gross Fixed Capital Formation (GFCF), Foreign Direct Investment (FDI) and Real Effective Exchange Rate (REER). The result revealed that long-run relationship exist among the estimated variables in the three models. MCU, MVA and GFCF promote total diversification and horizontal diversification in the long-run but the coefficients of MCU and MVA are insignificant. On the other hand, only Foreign direct investment and real effective exchange rate promote vertical diversification. The study recommended protection of infant industries, local sourcing of raw materials for production, Government programs that encourage competition among manufacturers in Nigeria and improved infrastructural development in order to enhance the productivity of the manufacturing sector in Nigeria that will position it for global competitiveness

Tracking progress in meeting sustainable development goal 9 industry-related targets: An index for policy prioritization

The Green Economy Progress measurement methodology is used to construct a multidimensional composite index, the Sustainable Development Goal (SDG)-9 Progress Index, which measures the progress of countries in meeting the industry-related targets of SDG-9. The index differs from performance indicies in that it focuses on changes over time rather than levels of performance at points in time. Another feature of this index is that it shows the progress of countries in relation to their targets, which differ from country to country. The index is based on five indicators for the three industry-related targets of SDG-9, those where sufficient data are available: manufacturing value added (MVA) as a proportion of Gross Domestic Product, MVA per capita, manufacturing employment as a proportion of total employment, carbon dioxide (CO2) emissions per unit of MVA, and the proportion of medium and high-tech industry in MVA. Application of the SDG-9 Progress Index shows that out of 124 countries, 58 progressed towards their targets over the period 2000–2016 while 66 regressed away from them. No correspondence is found between the country rankings identified with the SDG-9 Progress Index and those identified with three performance indicies using the same or relatively similar CO2 indicators for index construction but different methodologies. An examination of the weighting specifications in the SDG-9 Progress Index for the CO 2 emission intensity indicator shows that improvements in this indicator for six out of the ten most progressive countries have the greatest potential among the five indicators for improving their rankings.

Open Door System and Endogenous Growth in Indian Economy: An Empirical Analysis on the Role of Human Capital and R&D in Explaining Industrial Productivity

The present study investigates the impact of human capital, knowledge capital which is a function of human capital, and real exchange rate scenario in explaining long-run industrial total factor productivity (TFP) from 1980 to 2015 on the theoretical basis of the open endogenous growth model. The variables employed in the contemporary study include manufacturing value added (MNVA) as industrial output measure, gross fixed capital formation (GFCF) as a measure of capital and labour input which is measured using employment data. Gross enrolment ratio (GER) is taken as a measure for human capital formation, expenditure on research and development (R&D) as a proxy for knowledge capital, and real exchange rate indicates global economic shocks. The study involves estimating TFP for Industrial Sector during the post-liberalization period by employing Cobb-Douglas production function. The ARDL bounds test technique for cointegration revealed long-run relation among the varying factors studied. The Toda-Yamamoto causality test concluded bi-directional causality running between, R&D expenditure and Industrial TFP which sends a strong signal to the policymakers for a well-framed long-term integrated approach for human & knowledge capital formation which will act as a strong impetus for manufacturing firms to come up in terms of augmenting production and productivity and expanding foreign market horizon. JEL Classification: D24, E2, J24

Remittances and manufacturing sector growth in sub-Saharan Africa

This paper analyzes the link between remittances and the growth of manufacturing value-added (MVA) and explores whether the quality of institutions and exchange rate policy matter for the dynamics of the relationship in sub-Saharan African (SSA) countries. The findings suggest that when the level of financial development is accounted for, remittances have a positive impact on MVA. The standalone effect of remittances on MVA is, however, negative. The results also suggest that there is a positive influence of exchange rate flexibility on the dynamics between remittances and MVA. Furthermore, improvement in the business environment seems to matter for the performance of the manufacturing sector, but it is not significant to the dynamics between remittances and MVA. The development of the financial sector, on that account, emerges as an important factor influencing the impact of remittances on the growth of the manufacturing sector in SSA countries.

Manufacturing growth accelerations in developing countries

AbstractThis paper investigates the factors driving manufacturing growth accelerations in a sample of 134 developing countries over the period 1970 to 2014. We first identify growth acceleration episodes of manufacturing value added (MVA) by their year of initiation and according to a country’s income classification. We then estimate a probit model to explain what factors predict these MVA growth accelerations. Our results show that human capital and institutions represent contextual factors that favor the growth of manufacturing, together with macroeconomic policies related to investment, and openness to foreign trade and capital. We also find that most of these factors not only foster episodic accelerations of industry, but they contribute as well to a sustained process of industrialization that characterized the process of economic growth of a few successful countries over the period 1970 to 2014.

Does Human Capital Matter in Manufacturing Value Added Development in Africa?

Very few countries have been able to grow and accumulate wealth without investing in their manufacturing industries. Also, a strong and thriving manufacturing sector precipitates industrialization. Unfortunately, manufacturing value added (MVA) development in Africa has been very low. This paper empirically assesses the role of human capital in MVA (% of GDP) in Africa for the period, 1990-2011, using the IV-SLS technique with year and sub-regional fixed effects. Our results indicate that not all human capital indicators are ?born? equal with respect to MVA: Primary education has an inverted U-shaped relationship with MVA in Africa; secondary education has a negative significant relationship with MVA in the continent; and tertiary education has a significant positive association with MVA - tertiary education is good for increasing MVA in Africa. Other drivers have substantial relationship with African MVA. For example, economic development is significantly associated with MVA to the third degree polynomial, with negative leading coefficients. Other drivers with differential impacts include natural resources dependence, domestic investment, government consumption expenditure, trade openness, FDI stock, age dependency, credit to the private sector, social and political globalization, civil violence, and energy use intensity. We conclude with policy implications.

Accelerating Agro‐Manufacturing to Feed Africa

AbstractThis paper documents stylized facts on agro‐manufacturing, especially the food, beverages and tobacco (FBT) manufacturing value added (MVA) in Africa and empirically analyzes its determinants using data for a panel of African countries over the period 1990–2011. We also estimate for the sample of sub‐Saharan Africa and North Africa during the same period. The analysis is extended to food and beverages (FB) only MVA. The analyses point to large differences in sector shares both across countries at different levels of economic development. Using a two‐stage least squares (2SLS) regression method, it finds that a large proportion of the cross‐country variation in FBT MVA and FB MVA can be accounted for by country characteristics, policy and institutional variables. In particular, the paper finds that an inverted U‐shaped relationship with real per capita GDP for FBT MVA and FB MVA, except in FB MVA in North Africa where the reverse is true. Key positive drivers of FBT MVA for the entire continent include government consumption expenditure, household consumption expenditure, social globalization, dependence on oil, minerals, natural gas, coal and forest resources, arable land, and renewable electricity output. Major negative drivers are trade openness and population size. The policy implications and lessons of these results for increasing FBT and FB MVA and feeding Africa are discussed.

Manufacturing Value Added Development in North Africa: Analysis of Key Drivers

It is widely recognized that structural transformation lies at the heart of economic development of any nation. Recent research suggests that the industrial sector, especially manufacturing, is a key engine of growth in the development process, including that of North Africa. The necessity for structural transformation in North Africa arises from the fact that the sub-region needs high and sustained economic growth in order to make significant progress in generating increased productive and quality jobs and livelihood for its teeming population, especially the youth. Unfortunately, manufacturing development in North Africa has not improved over time. For example, its manufacturing value added (MVA) in world MVA accounted for only 0.10 percent of world MVA in 2013. Also, the share of North African MVA in GDP was just 16.00% in 2013 compared with Asia & Pacific?s 25%. This paper empirically assesses the key drivers of manufacturing value added in the sub-region using a time series cross-sectional data set of the countries for the period, 1990 to 2014. Two estimation techniques, the pooled panel OLS regression with year fixed effects and the IV-2SLS estimation procedure, were used. There is also a strong support for a non-monotonic, cubic (third degree polynomial) relationship between MVA with economic development. The following factors are found to exert significant positive effect on manufacturing added in North Africa: secondary education, agricultural land, domestic credit to the private sector, trade openness, inward stock of FDI, population size, and ICT infrastructure/technology. On the other hand, the results indicate that dependence on oil, mineral and natural gas rents, domestic investment rate, political globalization, institutionalized democracy, age dependency ratio (young), and civil violence have significant negative effect on MVA in the sub-region. The paper concludes with policy recommendations.

Nowcasting manufacturing value added for cross-country comparison

Manufacturing Value Added (MVA) is the key indicator of a country's industrial production. In order to facilitate international comparisons it is published in UNIDO's International Yearbook of Industrial Statistics for a large set of countries. Because of a time-gap of at least one year between the latest year for which data are available and the year for which MVA data must be reported in the Yearbook, nowcasting methods are used to fill in the missing data up to the current year. We propose a parsimonious methodology that exploits the relationship between MVA and GDP to produce reliable nowcasts of MVA.

Patterns of Industrial Development in Brazil - 1980-95 and Beyond

This is a companion paper to Para onde Vai a Estrutura Industrial Brasileira?, published by the same authors in A Economia Brasileira em Perspectiva - 1998. The long term trend analysis of the Brazilian industrial structure departs from the estimation of development patterns for manufacturing sector industries grouped into eight categories. Following the normal development pattern approach, the model estimates the value added (VA) share of each sector group in total manufacturing VA as a function of: per capita income, labor productivity in the manufacturing sector, country population, degree of industrialization and the GDP share of imports and exports. The sample used for the estimation of development patterns contains data for 80 countries characterized by different development levels in four years from 1980 to 1995, separated at five year intervals. The regression results reveal: a) the existence of stable patterns of industrial development over time; b) that the Brazilian industrial structure displayed a convergence movement towards the estimated normal pattern in most manufacturing industry groups. The few exceptions are analyzed in the text. Given the identified convergence movement, a projection exercise was carried out for the long term (year 2020) in the form of alternative scenarios for per capita income and labor productivity. The results highlight the stability of the industrial structure for the majority of industrial group. The exceptions are analyzed as a function of the different trajectories chosen for the exogenous variables.

North‐South comparison of the sources of change in manufacturing value added, 1975–80: A decomposition analysis

The author applies a decomposition method to analyse the growth performance of manufacturing value‐added (MVA) of selected industries in various regions of both the North and the South and, further, attempts to isolate and quantify regional growth or decline in the MVA of an industry which is region‐specific. The results show that during the post‐oil embargo period of 1975–80, not only has the MVA of most industries in all regions of the South except for Tropical Africa been steadily increasing, but also its growth patterns have revealed considerable regionalised viability. At the same time the patterns of MVA changes in the North have exhibited remarkable sensitivity to general fluctuations of the world economy.