Capital goods import and manufacturing skills upgrading in developing countries: evidence from the manufacturing sector in Botswana

Alexis Habiyaremye, UNU-MERIT

This paper examines the effects of capital goods import on productivity growth in Botswana’s manufacturing sector to provide further empirical evidence for the import-led growth hypothesis. Analysis based on sectoral data over the period 1986-2005 indicates a labour productivity increase, attributable to the import of machines and equipment. This productivity growth has been accompanied by the expansion of the manufacturing sector measured by the number of operating firms. Using industry level data, we also attempt to investigate whether such expansion has spurred an import-induced diversification into more technologically sophisticated industries. Our results from panel data analysis and industry technical skills growth decomposition show that although all analysed industries have been increasing their technical intensity as measured by skilled labour share in total employment, this improvement has mainly resulted from the technological and skills upgrading of existing industries rather than from the emergence of more technologically sophisticated industries in the manufacturing sector. This suggests that to curb the dependence on diamond export, the country will still have to further align important capital resources and more sophisticated technological skills to achieve its diversification objectives.

Venue: UNU-MERIT, Seminar Room, 4th floor

Date: 09 May 2007

Time: 16:00  CET