The Role of Labour Productivity, Manufacturing Sector Output and Export of Finished Goods in Achieving Transformational Productivity in Selected African Countries

Abstract

In this study transformational productivity refers to the capacity of an economy to attain long term gains in productive capacity by means of structural upgrading, technology adoption and sectoral efficiency gains. In contrast to straightforward productivity indicators, it reflects the efficiency gains inside a sector, as well as transitions to more value-added processes. As a way of operationalizing this concept, the study uses the Productive Capacities Index (PCI) that was developed by UNCTAD, which is a multidimensional measure of productive capabilities such as human capital, infrastructure, institutions, and structural change. This paper analyses the correlation between labour productivity, production in the manufacturing sector and exports of finished goods in the chosen African countries (Nigeria, Kenya, and Ethiopia) based on annual panel data between 2000 and 2022 (N = 69 observations). An ARDL panel framework is embraced to estimate both short and long-run dynamics. Results indicate that despite expected signs of the explanatory variables, the majority of the coefficients are statistically non-significant, which implies that the sectoral performance and transformational productivity are not significantly transmitted by the relevant variables in the sampled economies.. The empirical result showed a negative and insignificant relationship between labour productivity and transformational productivity; a positive but insignificant relationship between manufacturing sector output and transformational productivity; and also a positive and insignificant relationship between export of finished goods and transformational productivity. The study therefore concludes that labour productivity, manufacturing sector output and export of finished goods impacts on transformational productivity but not in a very significant way. If it must impact on it positively as suggested by theories then there is need to look at African dynamics to see how they can be helpful in achieving transformational productivity in Nigeria.