Total Factor Productivity and Technical Efficiency in the Ethiopian Manufacturing Sector

Melaku Abegaz ()

No 10, Working Papers from Policy Studies Institute

Abstract: In this paper a Stochastic Frontier Model is used to examine the technical efficiency and total factor productivity (TFP) growth in the Ethiopian manufacturing sector over the period 1996– 2009. TFP growth is decomposed into technical change (progress), technical efficiency change, and scale effect. With a firm level unbalanced panel data collected by CSA, individual estimations are made for each industrial group categorized by two digit ISIC except a three digit ISIC for food and beverage industrial groups. The empirical results indicate existence of large inefficiencies, inefficiency that explains at least 14 percent of output variation among firms. TFP has shown better progress after 2001/02 and the growth is largely explained by technical change which is a shift in production frontier. The effect of efficiency change is very small as most industrial groups have time invariant efficiency. In addition, the scale effect is zero or very small because most industrial groups have constant returns to scale or small deviation from constant returns to scale.

Keywords: Ethiopian manufacturing; stochastic frontier analysis; technical change; technical efficiency; total factor productivity (search for similar items in EconPapers)
JEL-codes: D22 L33 O14 (search for similar items in EconPapers)
Pages: 34pages
Date: 2013-04
New Economics Papers: this item is included in nep-cse and nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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