Input Quality Upgrading from Tariff Reduction and Firm Productivity: Evidence from Ethiopian Manufacturing

Using a panel of firms from Ethiopian manufacturing census covering the period 2000–2016, this paper investigates how openness to trade help firms' input quality upgrading which further contribute to productivity gains. We estimate the quality of imported inputs at the firm level, and firm-level productivity using the Levinsohn and Petrin method. Then we estimate the effect of input tariff cut on input quality and further measure how input quality through input tariff reduction affect firms' productivity at different stages of regression. Our results suggest that input tariff reduction is associated with firms’ input quality upgrading and further with improvement in firms’ productivity.The effect of tariff cut is more pronounced for input-importing firms, and our result implies that the effect of input tariff cut motivates firms to participate in foreign input markets and helps upgrading input quality, thus contributing to firm productivity. Hence, further input trade liberalization measures should be designed to help key strategic manufacturing sectors. Besides, strategies have to be put in place to integrate the manufacturing sector into the global supply chain to reap more productivity gains. JEL codes: D22 D24 F13 H32 L15 L23

The geography of agricultural input markets in rural Tanzania

The expansion of agro-dealers into remote areas can be seen as conducive to more smallholders adopting new technologies and inputs, to include improved seed and fertilizer. However, lower travel costs may be offset by agro-dealer decisions on stocking and pricing, reflecting both travel time from wholesale markets as well as the level of competition in localized areas. This paper investigates the geographical distribution of agro-dealers and related patterns of local market competition on the availability and prices of maize seed and fertilizer. We use a unique census of agro-dealers in eight districts of Tanzania (n = 299) which maps distribution points for agricultural inputs in these areas. Results suggested that despite a high number of agro-dealers, almost 30% of farmers lived more than an hour travel time from at least one agro-dealer. Instead of wide geographical coverage, agro-dealers tended to be found in clusters, with strong variation in cluster sizes between different districts. Overall, more remote agro-dealers faced less competition, resulting in fewer stocked product choices and charging higher prices to customers, even after controlling for travel time from district headquarters. Remote farmers are disadvantaged in their uptake of new technologies and critical production inputs due to lack of competition among agro-dealers. Our results suggest that highly aggregated and/or simplified measures of market access fail to reflect important heterogeneity in the market access conditions faced by farmers; a better understanding of distribution networks and competition is needed.

Determinants of the performance of small and medium-sized enterprises in emerging markets

PurposeThe aim of this article is to investigate the determinants of the performance of small and medium-sized enterprises in emerging markets: evidence from Vietnam.Design/methodology/approachThis article relies on the resource-based view to examine the factors affecting the performance of small and medium-sized enterprises in emerging markets. The method employed in the research is the generalized method of moments for testing hypotheses of data collected from the General Statistics Office of Vietnam in the period of 2013–2016.FindingsThe results show that factors such as the intensity of capital investment, age and size of the firm, labor productivity, foreign ownership, location, cost management effectiveness and export activities have a positive effect on the performance of Vietnamese small and medium-sized enterprises, while revenue growth rate, fixed assets and financial leverage tend to hinder their performance. This has brought important messages that the input markets and the business environment in emerging markets like Vietnam have not yet stimulated well-economic activities.Originality/valueThis study sheds light on a topic that has not been fully explored in small and medium-sized enterprises in emerging markets in general, and Vietnam in particular. Specifically, small and medium-sized enterprises in emerging markets reconfigure available resources and strengthen internal capabilities to overcome barriers of the shortages of strategic, rare and irreplaceable resources in order to improve their performance. This is a unique contribution to the existing literature and highlights the original value of this article.

Introduction to Part 2

The chapter demonstrates the internal reforms undertaken in the mid-1980 and major internal and external reforms the early-1990 and their effect on product and factor markets and institutional conditions. It also shows inter-relationship between international trade and investment behaviour. The reforms allowed TNCs in most industries. It was argued the reforms in general resulted in positive outcomes because India possessed critical industrial and skill endowments and capitalist conditions. The reforms resulted in augmentation of economic growth rate between 6 and 7 per cent which increased market size. This, in turn, gave incentives TNCs to bring in their assets and compete in domestic market. Apart from product markets, the reforms improved competitive conditions in input markets such as labour in sectors like software and services and automobiles and electronics. Furthermore, supply chain conditions improved significantly with entry of Japanese and South Korean multinationals.

Analytical Framework and Qualitative Observations

It develops a simple theory of Cournot strategic interactions between firms as basic framework and discusses behaviour of firms from dimensions of market structure, technology, scale economies, and value-chains (subcontracting). It demonstrates how large firms derived monopoly power in the product markets and monopsony power in the input markets. This, in turn, made them inward oriented in search of monopoly power in the Pre-reforms era. On the other hand, small and medium scale firms faced highly competitive conditions and high transactions costs in the domestic markets especially in the sub-contracting linkages with large firms. This, in turn, drove relatively efficient small and medium firms to exports where they are price takers facing lesser degree of transaction costs. The chapter also traces how exporting small and medium firms realized efficiency in production processes.

Analysing the determinants, constraints and opportunities of smallholder farmers access to input markets: evidence from northern Ghana

Smallholder farmers face multiple constraints in accessing input markets. This study seeks to understand the dynamics that influence input markets in northern Ghana and the opportunities that exist for smallholder farmers to increase their productivity and welfare. Using a random sample of 448 households, the study applied the probit and non-parametric methods in identifying the factors that influence farmers’ access to input markets and the key constraints faced by them. The results show that access to extension services, access to finance, distance to the nearest input market, and input source are significant factors that would be likely to influence farmers’ access to input markets. Lack of finance, poor road network, and low prices of output are the main critically ranked constraints limiting farmers’ access to input markets. Policy initiatives should be geared toward strengthening extension service delivery, farmer education on inputs, improving feeder roads, and encouraging private sector participation in input markets. Available opportunities to leverage on and improve farmers’ access to input markets include the governments’ input subsidy programmes, existing large-scale agricultural projects, private agricultural companies with contract farming models, and extensive network of input dealers and aggregators in the communities. These findings are relevant for farmers, input dealers and policy makers working to improve farmers’ access to input markets.

The Impact of Uniform Pricing Regulations on Incentives to Generate and Disclose Accounting Information

A persistent question in industrial organization is whether regulations restricting price discrimination in input markets can promote efficiency. Despite the extensive study of the economic effects of input pricing regulations, the literature is bereft of an examination of the role of accounting information. In this paper, we seek to fill the gap by modeling the effects of uniform pricing restrictions in input markets on firms’ information generation and disclosure. In doing so, we find that information considerations present an impetus for uniform pricing requirements since they promote incentives for retail firms to both acquire and disclose relevant accounting information. In effect, by shielding retail firms from excessive supplier exploitation, uniform pricing regulations create a richer and more transparent information environment. This, then, leads to welfare gains and even benefits that can accrue naturally to all supply chain partners including the supplier, whose actions are constrained by the uniform pricing regulation. This paper was accepted by Brian Bushee, accounting.

Knowledge, Oligopoly and Labour in Global Value Chains

The article explores knowledge in global value chains (GVCs) and its correspondence with the nature of employment in different GVC segments. It starts with the role of knowledge that is protected through intellectual property rights in creating oligopolies in product markets, which are then re-created as oligopolies in the input markets. Knowledge requirements, transmitted through governance relations and the distribution of power within GVCs, lead to the inter-firm distribution of profits within GVCs, and result in differing qualities of employment corresponding to the level of knowledge required in different production segments.

Guilds and the Economy

Guilds ruled many European crafts and trades from the Middle Ages to the Industrial Revolution. Each guild regulated entry to its occupation, requiring any practitioner to become a guild member and then limiting admission to the guild. Guilds intervened in the markets for their members’ products, striving to keep prices high, limit output, suppress competition, and block innovations that might disrupt the status quo. Guilds also acted in input markets, seeking to control access to raw materials, keep wages low, hinder employers from competing for workers, and prevent workers from agitating for better conditions. Guilds treated women particularly severely, usually excluding them from apprenticeship and forbidding any female other than a guild member’s widow from running a workshop. Guilds invested large sums in lobbying governments and political elites to grant, maintain, and extend these privileges. Guilds had the potential to compensate for their cartelistic activities by creating countervailing benefits. Guild quality certification was one possible solution to information asymmetries between producers and consumers, which could have made markets work better. Guild apprenticeship had the potential to solve imperfections in markets for skilled training, and thus to encourage human capital investment. The cartel profits generated by guilds could in theory have encouraged technological innovation by enabling guild masters to appropriate more of the social benefits of their innovations, while guild journeymanship and spatial clustering could diffuse new technical knowledge. A rich scholarship on European guilds makes it possible to assess the degree to which guilds created such benefits, outweighing the harm they caused. After about 1500, guild strength diverged across Europe, declining gradually in Flanders, the Netherlands, and England, surviving in France and Italy, and intensifying across large tracts of Iberia, Scandinavia, and the German-speaking lands. The activities of guilds contributed to variations across Europe in economic performance, urban growth, and inequality. Guilds interacted significantly with both markets and states, which helps explain why European economies diverged in the crucial centuries before industrialization.