Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/90529
Authors: 
Shiferaw, Admasu
Year of Publication: 
2010
Series/Report no.: 
Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 56
Abstract: 
This paper analyzes firm level adjustment of the product mix and its implications for aggregate output growth. Using firm level panel data from Ethiopian manufacturing during the period 1996-2007, it shows that about 30% of firms adjust their ‘extensive margin’ annually by adding and/or dropping at least one product and about half of those firms undertake such adjustment only through product adding. At the aggregate level, about 30% of annual growth in sales is accounted for by the adjustment of the extensive margin which is more than four times the net contribution of firm entry and exit. The paper also shows that the likelihood of adding a product tends to decline with firm size and increases dramatically with the incidence of large investment outlays. While the level of productivity does not seem to increase the probability of adding a product, a net increase in the number of products is strongly associated with subsequent growth in sales, productivity and capital stock at the firm level.
Subjects: 
Product Switching
Multiproduct Firms
Extensive Margin
Intensive Margin
Ethiopian Manufacturing
JEL: 
D21
E23
L11
L60
Document Type: 
Working Paper

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