Domestically sourced and imported raw material utilisation and labour productivity: evidence from small and medium-scale manufacturing firms of Ethiopia

This study is aimed to investigate the effect of domestically sourced and imported raw material utilisation on labour productivity in small and medium-sized manufacturing firms in Ethiopia. A two-stage least squares (2SLS) regression model is employed using survey data collected by the Ethiopian Statistics Service from 1,351 selected firms in 2020. The results show that domestically sourced and imported raw material utilisation intensity per labour is an important determinant of labour productivity in small and medium manufacturing firms in Ethiopia. Providing incentives for the industry's demand-driven agricultural product producers is suggested to address the shortage of raw materials. Expansion of industrial parks and sheds also help to mitigate infrastructure provision problems and maximise agglomeration effects. Furthermore, intervening to improve workers' wages would improve labour productivity.