Sources of Heterogeneity in Labor Productivity and Total Factor Productivity in Egyptian Manufacturing

Egypt Ranking in the World Competitiveness Report deteriorated between 2004 and 2017. Boosting competitiveness requires reforms on several important fronts, but raising labor productivity and TFP are perhaps the most pressing. This paper identifies the correlates of both labor productivity and TFP at the firm level in Egypt’s in manufacturing sector using Economic Census data for the year 2012/2013.We find significant heterogeniety in both Labor productivity and TFP between firms. By econometirically dicotomizing firms into low and high productivity regimes, we find that the correlates of productivity differ between these two sets of firms. By identifying the sources of heterogeneity between low and high productivity firms we show that there is considerable scope for the former to catch up with the lattter based on factors that are internal to the firm .However, the literature does not offer much insights as to how high productivity firms can increase their productivity further.