Measuring Technology in Ugandan Manufacturing

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Paula Stephens
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1 Measuring Technology in Ugandan Manufacturing Vittorio Bassi (USC), Raffaela Muoio (BRAC) Tommaso Porzio (UCSD), Ritwika Sen (IGC) and Esau Tugume (BRAC) Kampala, 14 December 2018

2 Motivation Firm data for Uganda already exists: Firm Census (UBOS), Enterprise Surveys (World Bank) This data shows that some firms are much more profitable than others, but not why this is the case Limited information on what high profitability firms do differently Understanding this is very important for industrial policy This project: a new survey of manufacturing firms Objective: look inside the firm to understand how high and low profitability firms differ

3 A New Survey of Manufacturing Firms Sectors: 1. Manufacturing of furniture 2. Manufacturing of structural metal products 3. Grain milling Most common sectors in manufacturing by employment share Geographical coverage: Representative sample of 52 sub-counties throughout Western, Central and Eastern region Target sample: 1000 firms (~350 firms already interviewed)

6 Product-level Information

7 Production Steps for a 2 Panel Door Step Step Description Examples of Machines 1 Design 2 Drying the timber Electric Cylinder 3 Cutting Bend saw, Circular saw, Table saw, Jig saw 4 Plaining Plainer/Jointers, Suffer plane, Benchtop plainer 5 Thicknessing Thicknesser 6 Edging / Ripping / Cutting / Shaping Shaping router, Circular saw, Jig saw, Miter saw, Spindle moulder 7 Sanding Orbital sander, Belt sander, Disk sander 8 Mortising / Assembling Horizontal mortise, Chain mortise machine, Square chisel mortise, Drill 9 Finishing / Painting Compressed air sprayer 10 Drying (after painting) Electric Cylinder

8 Dispersion in Production Steps Across Firms 1 - Design 2 - Drying 3 - Cutting 4 - Plaining 5 - Thicknessing 6 - Edging 7 - Sanding 8 - Mortising 9 - Finishing 10 - Final Drying Share of Firms

9 Do Differences in Production Steps Map into Differences in Profitability? Design Drying Profits 0 50, No Yes Profits 0 50, No Yes

10 Dispersion in Technology Usage Thickness Planers Jig Saws Splindle Moulders Drills Spray Compressed Air Routers Planers/Jointers Table Saws Circular Saws Benchtop Planers Square Chisel Mortises Band Saws Chain Mortises Horizontal Mortises Orbital Sanders Belt Sanders Disk Sanders Milter Saws Woodworking Cold Press Vertical Assembly Machine Power Hand Held Lathe Machine Electric Cylinders Share of Firms Using the Machine

11 Do Differences in Machine Usage Map into Differences in Profitability? (Log) Profit per Worker Number of Different Types of Machines

12 Machines vs Skills vs Size Skills Size Machines Profit Per Worker Profit Per Worker Profit Per Worker Workers Skills Size Number of Machines Type

13 Skills vs Machines in Explaining Worker Earnings Skills Machines Salary Salary Skills Machines

14 Conclusions and Next Steps Key findings so far: Measuring the production process sheds light on important sources of differences in profitability Firm mechanization more than skills seems to be a key determinant of both firm profits and worker earnings Next steps: Why don t we see more firms increase their mechanization? Potential explanations: Access to credit, Risk, Lack of machine providers

15 Policy Implications Mechanization and access to machines as an important avenue for industrial policy Improving access to skills without improving access to machines might not be enough to increase productivity Organizing firms into groups and facilitating their access to shared machines seems a promising policy Government of Uganda has been donating machines to local SACCOs under the Ministry of Trade Important to collect data to evaluate efficacy of these programs and lead to other countries adopting these systems

16 Policy Implications

17 APPENDIX

18 Who Gets the Benefits from Technology Usage? (Log) Workers' Salary (Log) Profit per Worker

19 Who Gets the Benefits from Technology Usage? (Log) Workers' Salary (Log) Profit per Worker

23 WOODWORKING EQUIPMENT

23 WOODWORKING EQUIPMENT Chisel Mortiser Chisel mortiser... 1199 Cutting Machine Heavy duty band saw... 1197 Scroll saw... 1197 Dust Collector Dust collector... 1201 Overarm Router Overarm router... 1202