Economics(PhD)

Permanent URI for this collection

http://etd.aau.edu.et/handle/12345678/176

Browse

Browsing Economics(PhD) by Author "Almas Heshmati"

Now showing 1 - 6 of 6
  • No Thumbnail Available
    Item
    Access to Bank Loans, Income Distribution and Economic Growth in agent Based Modeling: Evidence from Evolutionary Perspective
    (Addis Ababa University, 2017-06) Atnafu Gebremeskel; Almas Heshmati
    This doctoral dissertation consists of three inter-related studies which constitute its main text, with introductory and summary chapters. The three main studies share a common feature in that they investigate the link between access to bank loans, income distribution and productivity growth. The second chapter is a theoretical framework that uses agent-based computational economics (ACE) to detect the link between access to bank loans and functional income distribution. The third chapter uses Ethiopian firm-level and national income data to validate the second chapter. The fourth chapter investigates the effect of functional income distribution on productivity growth from an evolutionary economic perspective. The second chapter (first study) focuses on Dosi et al.’s (2013) agent-based model which assumes that a well-functioning banking system exists and that industries are composed of both capital and non-capital goods’ producing sectors. As such, monetary policy has a minimal role in impacting functional income distribution leading to an active use of macroeconomic policy. Chapter 2 modifies this model to capture the realities of developing countries where the banking system’s supply of services is smaller than what is considered optimal. The system is heavily influenced by inside agents and industries are dominated by non-capital goods’ producing firms.The modified model theoretically links firms’ access to bank loans and functional income distribution in agent-based modeling. The results based on the modified model indicate that when firms have access to bank loans, functional income distribution improves. Unlike many firm level studies which focus on the firms per se, Chapter 2 argues that it is possible to utilize firms’ economic actions and their access to bank loans to explain how income inequalities are generated and evolve over time. Theoretically the chapter finds that personal income distribution is an emergent phenomenon. This result is in agreement with Thomas Schelling’s ‘Micromotives and Macrobehaviour,’ where he established aggregate behavior as an emergent phenomenon. Its major conclusion is that access to bank loans at the firm level improves income distribution in society. The third chapter (second study) empirically validates the theoretical results obtained in Chapter 2 (first study). It employs the descriptive output and econometric (external as is usually said) validation techniques as an indirect identification strategy to examine the link between access to bank loans and income distribution. It uses data from the Ethiopian Central Statistical Agency (CSA) on medium and large scale manufacturing and national personal income distribution data from the Ethiopian Ministry of Finance and Economic Development (MoFED). Its major conclusions are: (i) firms’ access to bank loans is one mechanism through which income distributional issues can be explained, (ii) firms’ financial structures matter, that is, whatsoever the source of funds, if they are used as investments in fixed capital, the functional income distribution improves, and (iii) functional income distribution is strongly associated with personal income distribution. The chapter will contribute to policy and also enrich the limited literature on the finance-inequality relation. The fourth chapter (third study) links functional income distribution to productivity growth. Its main focus is on examining how functional income distribution can influence the evolution of productivity thereby promoting economic growth. It employs Nelson and winter’s (1982) evolutionary economic framework, evolutionary theory of economic change and the subsequent developments in the field of evolutionary economic modeling. These are used jointly with the evolutionary econometric approach which sees economic growth as an open ended process. The major conclusion of the fourth chapter (third study) is lack of strong evidence of evolution (intra-industry selection) to foster productivity growth and re-allocation (structural change). Thus, the three studies not only shed light on the inter-relationships between access to bank loans, income distribution and productivity growth through a deep analysis of the concepts, theories and their usefulness, but also empirically investigate the nature of their causal relationships and estimate their effects. These two aspects will contribute to the growing literature on ACE.
  • No Thumbnail Available
    Item
    Essays on Firms’ Growth and their Survival in Ethiopia: The Role of Firm Experience
    (A.A.U, 2020-07) Guta Legesse Tessema; Almas Heshmati
    Firms’ growth, survival, and distribution has been a key research subject in many countries and more so in developing countries because of the limited number of firms and scant evidence on their performance and where they are located in these countries. The nexus between ageing, performance, and survival is important for sustaining the promising and fast-growing Ethiopian economy. This thesis addresses the link between firms’ experience, growth, survival, and distribution using medium and large-scale manufacturing firms in the country. The major data source is the Central Statistical Agency (CSA) of Ethiopia. Data for Chapter 4 comes from the World Bank’s Enterprise Survey database (World Bank, 2015). The thesis applies multiple estimation techniques including system GMM, quantile regression, complementary loglog regression, the Kaplan-Meier survival analysis plots, probit estimation, Heckman selection model, and the fixed effects models. The results of the pooled OLS estimation are reported for a comparison. The studies included in the thesis have some key findings. The findings of the first essay (Chapter 2) on firms’ experience and performance show that experience is positively associated with labor productivity both in the short and in the long run. Firm experience was measured using a composite index developed for this purpose. The sensitivity analysis, however, shows that the positive effect of experience disappears when we estimate the relationship using true panel data. From the elements used in the development of the index, only cohort age and wage rate have a significant positive effect on a firm’s performance.Firms in Ethiopia rely heavily on imported inputs and how this relates to their performance is investigated in the second essay (Chapter 3). Using import intensity as a proxy for firm experience, we found a statistically significant negative effect of import intensity on the risk of exit using a probit estimation. Imported input-intensive firms show a better likelihood of survival using the complementary log-log estimation. Overall, the results from the Kaplan-Meier plots, the complementary log-log, and probit estimations show that importing inputs from abroad is associated with lower risks of a firm’s exiting. In the third essay (Chapter 4), the focus of the analysis shifts to the distribution and determinants of high-growth firms (HGFs). Firm growth distribution and HGFs’ special features is another important aspect of this thesis. The over population of high growth firms in Addis Ababa and Oromia and their unique business challenges are discussed in the third essay. The fourth essay (Chapter 5) examines how ageing is related to a firm’s performance. It complements the first paper which uses pseudo panel data. In Essay 4, we use a true panel of firms and use age as an indicator as opposed to an index in the first essay. After controlling for sample selection using Heckman’s selection model, we observe that there is a no relationship between growth and a firm’s age but there is a convex relationship between size and a firm’s growth rate. Small firms tend to grow faster but there is no significant difference in labor productivity values among firms based on age and size
  • No Thumbnail Available
    Item
    Essays on the Path to Industrialization in Ethiopia
    (A.A.U, 2020-06) Selamawit G. Kebede; Almas Heshmati
    This study explores the overall performance of the manufacturing sector in Ethiopia over time. It addresses two fundamental research questions: What is the long run impact of manufacturing growth on the Ethiopian economy? and what have been the major explaining factors of Ethiopian manufacturing performance overtime? It uses the endogenous growth theory, specifically the Kaldor growth hypothesis; the heterodox economic approach with a focus on institutions, balanced and unbalanced theories of growth and the public policy endogenous growth theory as theoretical formulations to empirically investigate the research questions. The research covers five independent articles addressing the two major questions using different dataset and estimation approaches. For the time series data, it uses the vector error correction model (VECM), Granger causality, the impulse response function and the autoregressive distributive lag (ARDL) parametric estimation approaches. For cross-sectional data, a non-parametric social accounting matrix (SAM) multiplier analysis is computed. The research also uses industry level panel data for exploring the link between energy use and labor productivity in the manufacturing sector with a dynamic panel estimation approach. The findings show that there is a long run positive relationship between manufacturing and economic growth validating Kaldor’s growth hypothesis in Ethiopia. The empirical analysis of the political economy of industrialization in Ethiopia shows that institutions, especially political institutions, have been one major setback limiting the performance of the manufacturing sector in the country. This shows that the heterodox economic approach with its institutional economic perspective is another framework to better understand the industry and economic structure of Ethiopia. The sectoral linkage analysis shows a weak direct and total linkage of multi-faceted industries with other sectors. Results, suggests that the agriculture-based industry is relevant for Ethiopia with higher output, GDP, demand and income multiplier coefficients. The research further validates the public policy endogenous growth theory in Ethiopia at the industry level, with a significant effect of public policy instruments on Ethiopian industry growth in the long run. The last paper confirms that energy has been other major factor affecting manufacturing productivity in Ethiopia. Yet, the research validates different theories empirically taking Ethiopia as a case study. In a nutshell, the study 5implies a focus should be given to the political economy environment, agriculture-based industries, public policy instruments and efficient energy use to induce industrialization in Ethiopia.
  • No Thumbnail Available
    Item
    The Impact of Foreign Capital Inflows (FCIs) on Economic Growth in Sub-Saharan Africa (SSA)
    (Addis Ababa University, 2019-06) Yemane Michael; Almas Heshmati
    This chapter analyzes FDI’s impact on economic growth in SSA countries for which relevant macroeconomic data is available for the period 2001-15. To achieve this, it develops a dynamic system GMM model to capture FDI’s impact on economic growth. It chooses the dynamic panel system GMM because of its superiority over other models in that it takes care of endogeneity problems and alleviates possible biases in the estimation. Besides, it also provides a solution to the problem associated with time-invariant individual heterogeneity, among others. The study includes 43 SSA countries for which data is available. The countries are categorized into ‘resource-rich’ and ‘resource-poor’ using data on their natural resource endowments and other important factors. The study found that there was no meaningful difference in the growth of per capita GDP and in these countries’ ability to attract FDI inflows based on their resource endowments. These findings indicate that FDI had a negative and statistically significant effect on the per capita GDP growth rate in SSA countries in the study period. However, the own lagged value of the growth rate of per capita GDP and gross capital formation, which is used as a proxy for domestic investments and exports, had positive and statistically significant effects on the growth rate of per capita incomes. Though FDI is touted as a catalyst for growth, the empirical findings of this study do not support this claim in SSA. The study provides an explanation for the possible reasons for this divergence from the expected positive effects. It is clear that FDI is not a panacea for the economic malaise in the region and is not contributing to the betterment of lives and welfare. Hence, it is time for SSA governments and policymakers to find out where the problem lies and align policies in a way that make FDI have a more meaningful positive contribution in dragging millions of people out of poverty.
  • No Thumbnail Available
    Item
    Multidimensional Poverty, Inequality, Vulnerability to Poverty, and Production Factor Risks in Ethiopia
    (A.A.U, 2019-12) Getu, Tigre; Sisay Asefa; Almas Heshmati; Assefa Admassie
    Measures of income or consumption expenditure-based poverty provide incomplete information and guidelines for addressing poverty. Applying the Alkire-Foster method of a multidimensional poverty analysis using Ethiopian Demographic and Health Survey in this thesis shows that multidimensional poverty is high in Ethiopia in general and in rural Ethiopia in particular. Multidimensional poverty has been decreasing moderately over time, but still large proportions of the population live under multidimensional poverty. Households that are poor at any given point in time may differ from those who are vulnerable to poverty and there should be a distinction between poverty prevention (vulnerability) and poverty alleviation programs. The distribution of vulnerability across different segments of the population is different from the distribution of poverty. Interventions and programs that are targeted at reducing the level of vulnerability in the population therefore need to be targeted differently from those aimed at poverty alleviation. There are also distributional concerns of well-being indicators. Consumption inequalities are higher in urban than in rural areas in the country. Considerable differences in regional consumption inequalities are observed between different regions. Inequalities in the multidimensional indicators decrease over the wealth quintiles while living standard contributes the most to multidimensional inequalities. Reducing inequalities between socioeconomic groups will have a greater impact on reducing poverty than reducing inequalities within groups as between group elasticity is greater than within group elasticity. Parents’ education has a positive impact on children’s education, and educated children have a positive effect on reducing intergenerational inequalities. In rural Ethiopia, production and generation of wealth is highly associated with agricultural productivity and risks in the sector. Risks are inherent in agricultural production. A stochastic production function to estimate variability (risks) indicates that fertilizer and labor are risk decreasing inputs while land is risk increasing input. The more farmers diversify their crops, the less is the yield variability or risks. The risk decreasing/increasing effects of these farm inputs vary by location. Considering risk is important for managing farm risks and thus ensuring food security.
  • No Thumbnail Available
    Item
    Off-farm Activities, Incomes and Household Welfare in Rural Ethiopia
    (A.A.U, 2020-04) Yonatan Desalegn; Almas Heshmati
    Ethiopia has been a rural and agrarian society in all known history and remains so to this day. A survey of literature shows that the country’s focus has been on agriculture in terms of research interests and development policies. However, these agriculture-based approaches have not delivered on their promises to move rural households out of destitution and poverty. While various alternative growth paths to poverty reduction have been proposed, this dissertation focuses on off-farm economic activities. This dissertation makes the case for off-farm activities in four interlinked papers. This chapter gives a summary of the role played by off-farm participation and income on rural households’ welfare. It motivates the need for studying the relationship between off-farm income generating activities and rural household welfare in developing countries. It gives a unifying theme and an overarching conceptual framework within which the different studies in the dissertation fall. The first of the four papers discusses what drives off-farm participation and incomes. The remaining three papers explore the relationship between off-farm activities and concepts of household welfare – consumption smoothing, multidimensional poverty and vulnerability, and agricultural commercialization. The findings support that off-farm activities are important for rural households’ welfare and development policies should take note of this aspect.