Understanding Productivity Dispersion: Evidence on the Role of Mechanization from Urban Uganda joint work with Raffaela Muoio, Tommaso Porzio, Ritwika Sen and Esau Tugume

Abstract:

We study the drivers of productivity dispersion across firms in three manufacturing sectors in urban Uganda, focusing in particular on the role of mechanization. To do so, we first design and implement a new representative survey of 1,000 manufacturing firms and their employees, which allows us to collect information on the details of the entire production process for key products. The data reveal a key role of firm-level mechanization as a statistical predictor of productivity: completing production steps with electrically powered machines as opposed to manual tools is the strongest predictor of productivity differences across firms. We further uncover a very active rental market, with most firms renting machines from other firms in the same sector. Informed by these key facts, we propose a simple model that allows us to: i) shed light on the link between mechanization and productivity, ii) measure distortions in the market for machines, and iii) simulate policy counterfactuals. Finally, we outline potential interventions that are motivated by the predictions of the model, and that we are currently piloting in the field, in preparation for a large-scale field experiment aimed at increasing productivity through mechanization.