Energy use and labor productivity in Ethiopia: The case of the manufacturing industry

Abstract

This study investigates the effect of energy use on labor productivity in the Ethiopian manufacturing industry. It uses panel data for the manufacturing industry groups to estimate the coefficients using the dynamic panel estimator. The study's results confirm that energy use increases manufacturing labor productivity. The coefficients for the control variables are in keeping with theoretical predictions. Capital positively augments productivity in the industries. Based on our results, technology induces manufacturing's labor productivity. Likewise, more labor employment induces labor productivity due to the dominance of labor-intensive manufacturing industries in Ethiopia. Alternative model specifications provide evidence of a robust link between energy and labor productivity in the Ethiopian manufacturing industry. Our results imply that there needs to be more focus on the efficient use of energy, labor, capital, and technology to increase the manufacturing industry's labor productivity and to overcome the premature deindustrialization patterns being seen in Ethiopia.