TFP determinants in the manufacturing sector: the case of Ecuadorian firms

Abstract

Purpose: Using a large firm-level data set, this paper examines total factor productivity (TFP) and its determinants in the Ecuadorian manufacturing sector in the period 2007–2018. Design/methodology/approach: I analyze the role played by traditional TPF determinants, including internal firm characteristics, international trade activities, financial constraints and competition intensity. I contribute to the literature by presenting quantile regression results. Moreover, I analyze industry patterns, distinguishing between industries according to their technological intensity (following the organisation for economic co-operation and development classification). Findings: My results confirm that firm age is positively related to TFP level but negatively related to TFP growth. I also find that being an exporter and an importer at the same time is associated with higher TFP levels and that this effect is higher than when being only an exporter or an importer. Additionally, l find that credit is positively related to TFP levels. Finally, I find that more competition is positively related to productivity in lower quantiles of output. Practical implications: The results are the source of tools to propose policy recommendations, which are stated in the present document. Originality/value: This paper aims to reopen the debate of firm productivity determinants in a developing country such as Ecuador. The authors use a set of covariates less analyzed in this issue.