Essays on Equality and Productivity

Understanding and enhancing productivity has been at the heart of sustainable growth goals of developing countries. Policy makers and multilateral agencies have inquired about what role the government can play in this regard. The empirical evidence at the micro level however, is surprisingly limited. This dissertation contributes to this literature by undertaking a firm and product level study of productivity. It estimates a causal effect of a typical industrial policy measure on total factor productivity and other firm outcomes. It also forwards a micro level explanation of the low productivity of capital despite its shortage in developing countries. We find that typical policy incentives like tax holiday and cheap loans targeted at firms in certain sectors and locations have negatively affected total factor productivity due to entry of less productive firms and diversification. We find that human capital, power and road infrastructure positively determine the productivity of capital. The dissertation goes on to examine gender pay inequality by constructing a new measure from gender disaggregated labour share in value added. This measure is comparable across time and across countries. We also undertake a causal analysis of what determines gender pay inequality. We find that although gender pay inequality has been declining it is still substantial. In addition in some middle income countries income have to triple for gender pay gap to close

The Effectiveness of Industrial Policy in Developing Countries: Causal Evidence from Ethiopian Manufacturing Firms

Prioritizing the growth of particular sectors or regions is often part of LDC growth strategies. We study a prototypical example of such policies in Ethiopia, exploiting geographic and sectoral variation in the form and scale of the policy for identification. Using product-level data on Ethiopian manufacturing firms we show that the policy was unsuccessful: There was no improvement in productivity, productive assets, or employment. The policy failed due to its negative effects on productivity of the entry of new firms and existing firms diversifying. Moreover, subsidised loans and tax-breaks led to an increase in capital but not in machinery.info:eu-repo/semantics/publishe

The Effectiveness of Industrial Policy in Developing Countries: Causal Evidence from Ethiopian Manufacturing Firms

Prioritizing the growth of particular sectors or regions is often part of LDC growth strategies. We study a prototypical example of such policies in Ethiopia, exploiting geographic and sectoral variation in the form and scale of the policy for identification. Using product-level data on Ethiopian manufacturing firms we show that the policy was unsuccessful: There was no improvement in productivity, productive assets, or employment. The policy failed due to its negative effects on productivity of the entry of new firms and existing firms diversifying. Moreover, subsidised loans and tax-breaks led to an increase in capital but not in machinery.info:eu-repo/semantics/publishe