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The Impact of Sector-Specific Industrial Policy on Manufacturing Firm Performance: Quasi-experimental Evidence from Ethiopian Chemical Industries

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Moges Tufa
Moges Tufa
Moges Tufa
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Mans Söderbom
Mans Söderbom
Mans Söderbom
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Zerayehu Sime
Zerayehu Sime
Zerayehu Sime
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Abstract and Figures

This study evaluates the impact of a sector-specific industrial policy program on the performance of Ethiopian chemical manufacturing firms using a quasi-experimental design. The data for the study come from firm-level field surveys and administrative sources. To account for heterogeneity and selection bias due to observable and unobservable factors, we employ a range of empirical strategies, including quantile regression, propensity score matching (PSM), endogenous switching regression (ESR), and generalized propensity score (GPS) models. We also used alternative estimation methods that fit our data and sample size. Our findings show that the program has a positive and significant effect on productive capacity utilization of beneficiary firms, while there is no evidence of any impact on employment generation. The results show that the program’s beneficiary firms utilized an actual productive capacity of 4.5–7.6% more than non-beneficiaries. We conclude that the program has mixed effects on the performance of the domestic chemical manufacturing firms. This study contributes to the scant literature that provides empirical evidence that informs public policy decisions in the context of developing countries.
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Vol.:(0123456789)
Journal of Industry, Competition and Trade (2023) 23:363–397
https://doi.org/10.1007/s10842-023-00408-z
1 3
The Impact ofSector‑Specific Industrial Policy
onManufacturing Firm Performance: Quasi‑experimental
Evidence fromEthiopian Chemical Industries
MogesTufa1· MansSöderbom2· ZerayehuSime1
Received: 2 March 2023 / Revised: 3 October 2023 / Accepted: 14 November 2023 /
Published online: 23 December 2023
© The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2024,
corrected publication 2024
Abstract
This study evaluates the impact of a sector-specific industrial policy program on the per-
formance of Ethiopian chemical manufacturing firms using a quasi-experimental design.
The data for the study come from firm-level field surveys and administrative sources. To
account for heterogeneity and selection bias due to observable and unobservable factors,
we employ a range of empirical strategies, including quantile regression, propensity score
matching (PSM), endogenous switching regression (ESR), and generalized propensity
score (GPS) models. We also used alternative estimation methods that fit our data and sam-
ple size. Our findings show that the program has a positive and significant effect on pro-
ductive capacity utilization of beneficiary firms, while there is no evidence of any impact
on employment generation. The results show that the program’s beneficiary firms utilized
an actual productive capacity of 4.5–7.6% more than non-beneficiaries. We conclude that
the program has mixed effects on the performance of the domestic chemical manufacturing
firms. This study contributes to the scant literature that provides empirical evidence that
informs public policy decisions in the context of developing countries.
Keywords Sector-specific industrial policy· Firms· Impact-evaluation· Quasi-
experimental design· Dose–response· Evidence-based policy
JEL Classification L5· L52· O24· L65· O25· L25
* Moges Tufa
mogest2@yahoo.com
Mans Söderbom
mans.soderbom@economics.gu.se
Zerayehu Sime
zerayehu2005@yahoo.com
1 Department ofEconomics, Addis Ababa University, AddisAbaba, Ethiopia
2 Department ofEconomics, University ofGothenburg, Gothenburg, Sweden
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
ResearchGate has not been able to resolve any citations for this publication.
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