Industrial Clustering, Firm Performance and Employee Welfare

Evidence from the Shoe and Flower Cluster in Ethiopia

by Tigabu Degu Getahun (Author)
Thesis 235 Pages


The author examines the productivity, profitability and welfare effects of industrial clustering and a public policy promoting industrial clusters in Ethiopia. He uses reliable counterfactuals as well as original enterprise and worker level data. By investigating the effect of firm, time, entrepreneur and site specific factors as well as endogenous location choice issues, the author finds strong evidence for the existence of significant agglomeration economies in the Ethiopia leather footwear cluster. Using primary survey data collected from firms which benefited from the cluster policy and those that did not, both before and after the implementation of the policy, the author shows the unintended negative impact of a cluster prompting policy in Ethiopia. The book is essential reading for those who are interested in the gender and welfare impact of female full time labor force participation in industrial jobs.

Table Of Content

  • Cover
  • Title
  • Copyright
  • About the author(s)/editor(s)
  • About the book
  • This eBook can be cited
  • Abstract
  • Zusammenfassung
  • Acknowledgement
  • Contents
  • List of Tables
  • List of Figures
  • List of Acronyms
  • 1. General Introduction
  • 1.1 Background
  • 1.2 Literature Review and Experimental Hypotheses
  • 1.3 Research Problem and Significance of the Study
  • 1.4 Research Objectives and Questions
  • 1.5 Methods
  • 1.6 Structure of the Book
  • 2. Industrial Clustering and Firm Performance: The Ethiopian Leather Shoe Industry
  • 2.1 Introduction
  • 2.2 Overview of the Ethiopian Leather Shoe Industry
  • 2.3 Conceptual Framework
  • 2.4 Survey Design, Data and Measurement
  • 2.5 Characteristics of Sample Enterprises
  • 2.6 Firm Location Choice
  • 2.7 Industrial Clustering, Firm Performance and Employee Welfare
  • 2.8 Estimation Strategy and Results
  • 2.9 Transmission Mechanisms
  • 2.9.1 The Leather Footwear Cluster and its Supply Chain
  • 2.9.2 Industrial Clustering and Small Firm Growth Barriers
  • 2.10 Concluding Remarks
  • 3. Impacts of the Cluster Development Program in Ethiopia
  • 3.1 Introduction
  • 3.2 Data and Sampling Method
  • 3.3 Pre-Intervention Characteristics of Sample Firms
  • 3.4 Potential Impacts of the MSME Cluster Development Program
  • 3.5 Evaluation Methods, Results and Discussions
  • 3.5.1 Evaluation Methods
  • 3.5.2 Estimation Results and Discussions
  • 3.6 Concluding Remarks
  • 4. Welfare and Gender Impacts of Female Employment in an Industry Cluster: Evidence from the Flower Cluster in Ethiopia
  • 4.1 Introduction
  • 4.2 Context
  • 4.3 Theoretical Model
  • 4.4 Econometric Model
  • 4.5 Sampling Method, Data and Measurements
  • 4.6 Initial Demographic and Socio-Economic Characteristics
  • 4.7 Estimation Strategy and Results
  • 4.7.1 Impact on the Monetary Dimension of Wellbeing
  • 4.7.2 Impact on the Non-Monetary Dimension of Wellbeing
  • 4.7.3 Gender Roles
  • 4.7.4 Transmission Mechanism: Drivers of the Observed Welfare Changes
  • 4.8 Concluding Remarks
  • 5. Conclusion
  • 5.1 Synopsis
  • 5.2 Limitations of the Study and Suggestions for Future Research
  • References
  • Annexes

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List of Tables

Table 2.1: Years of Operation of the leather footwear manufacturers

Table 2.2: Initial numbers of workers among leather footwear manufacturers

Table 2.3: Sources of Initial Investment and Working Capital

Table 2.4: Percentages of formally registered leather shoe manufacturers in Ethiopia

Table 2.5: Characteristics of leather shoe manufacturer entrepreneurs in Ethiopia, 2013

Table 2.6: Site-specific factors of leather manufacturing firms in Ethiopia, 2013

Table 2.7: Major reasons for firm location choice among leather shoe manufacturers, 2013

Table 2.8: The performance of clustered and non-clustered leather shoe industry firms

Table 2.9: Leather shoe manufacturer marketing channels by location, 2013

Table 2.10: Wage rates, Number of employees and Growth among Leather shoe manufacturers

Table 2.11: Work experience among employees of clustered and non-clustered leather shoe manufacturers in Ethiopia, 2013

Table 2.12: Percentages of female workers in the leather shoe industry in Ethiopia, 2013

Table 2.13: Nearest neighbor matching estimates of industrial clustering effects on the leather shoe manufacturers’ performance

Table 2.14: Random effect estimates of the industrial clustering effects on the leather shoe manufacturers Performance

Table 2.15: Regression estimates of the earning function of cluster impacts on the leather shoe Manufacturers, 2013

Table 2.16: Percentages of Shoe manufacturers that collaborate frequently with other Manufacturers, 2013

Table 2.17: Relationship Between firm performance and horizontal collaboration in the leather shoe industry in Ethiopia, 2013 ← 15 | 16 →

Table 2.18: Relationship between firm performance and downstream collaboration

Table 2.19: Relationship between firm performance and upstream collaboration

Table 2.20: Mean scores of small firm growth constraints in the leather shoe industry, 2013

Table 3.1: Pre-Intervention Entrepreneur characteristics

Table 3.2: The Characteristics of the Control and treatment Firms before the implementation of the cluster policy

Table 3.3: Mean monthly performance indicator values among control and treatment leather shoe manufacturers before the implementation of the cluster policy

Table 3.4: The performance of treatment and control firms in 2010 and 2013

Table 3.5: The DID Estimates of the impacts of the cluster development program

Table 3.6: Business network effects of the cluster development policy: DID model results

Table 3.7: Impacts of cluster policy on information and experience exchange collaboration

Table 3.8: Percentage of Shoe manufacturers that collaborated frequently with similar firms in the leather shoe industry in Ethiopia

Table 3.9: The mean value of Small firm growth constraint indicators in the leather shoe industry in Ethiopia

Table 4.1: Education and Experience of the Women and Their Spouse

Table 4.2: Demographic Characteristics

Table 4.3: Initial Economic Condition of the Respondent by Participation Status

Table 4.4: The Initial Characteristics of the respondent Parent

Table 4.5: Potential Impact of female Flower Job employment

Table 4.6: DID Estimation of Female Employment Impact on Wage and Non-wage Income

Table 4.7: The FIML Estimates of Selection & Consumption Welfare Equation ← 16 | 17 →

Table 4.8: The Computed ATE and ATET values based on the Consumption Function Estimates

Table 4.9: DID, FE, DID_GMM and DID-3SLS Estimate of Consumption Welfare

Table 4.10: Annual expenditure on clothing, cloth, tailoring and footwear (Birr), 2013

Table 4.11: Impact on Poverty Incidence

Table 4.12: The Probit Model estimate of the Poverty Impact of Female Employment

Table 4.13: The FIML Estimates of log of per Adult Food Consumption Equations

Table 4.14: The Computed ATE and ATET values based on the food Consumption Function Estimates

Table 4.15: Impact on Food consumption

Table 4.16: Percentage of children and adults who ate one, two three and four times per day

Table 4.17: Percentage of household members who ever sleep hungry last week,2013

Table 4.18: Food Insecurity and hunger Status Level-Categorical

Table 4.19: Impact on Food Insecurity and Hunger scale-Continuous

Table 4.20: Women’s Own Happiness Assessment, 2013

Table 4.21: Impact on Intra-Household Leisure Time Allocation, 2013

Table 4.22: Percentage of Member women and Average Social Capital Score, 2013.

Table 4.23: Access to Emergency Fund

Table 4.24: Average Monthly hour the women spend on domestic work

Table 4.25: Intra-Household Earning Difference


ISBN (Hardcover)
Publication date
2016 (February)
Frankfurt am Main, Berlin, Bern, Bruxelles, New York, Oxford, Wien, 2016. 235 pp., 60 tables, 16 graphs

Biographical notes

Tigabu Degu Getahun (Author)

Tigabu Degu Getahun studied economics at the University of Copenhagen and the University of Bonn. He is a Senior Researcher at the University of Bonn and a Research Fellow at the Ethiopian Development Research Institute (EDRI) in Ethiopia.


Title: Industrial Clustering, Firm Performance and Employee Welfare