Measuring Economic Efficiency: A Case Study of State Owned Textile Industries in Ethiopia.

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An important fact or that would influ ence the success or f a ilul of an industrial concern is the degree of efficiency in the utilizati on of resourc es und er its command. In Ethiopia efficiency is a major problem. Th e r e a r e some evidences to support the contention that resources are being utilized inefficiently. By emp loying the Oeomestic Reso urce Cost (ORe) methodology in general equilibrium settin g . this st udy attempts to empi~iea~ly estab lish the incidenc e of prot ect ion and the magnitude of efficiency in th e state own ed textile industry at a point in time. The major findings are as follows: (a) The system of prot ection provides a uniform nominal protection to all firms (b) The eff ective protection is high and differs substan tially among firms (c) The domestic r esource cost is high and differs subst antially among firms. indicating inefficiency (d) Firms with high domestic resource cost are acco rd ed high protection while firms with low domestic r eso urce cost are offered low protection . This indica t es th a t the Ethiopian system of protecti on encouraged and supported in eff ici e nt firms (e ) Wide differences exist between economic and private profitability among firms . indicating the presence of price pistortions both in the product and fact or markets . The quantitative estimates further indicat e that in a number of cas es the effect of gove rnment policy was not consistent with objective of economic eff ici ency. To enha nce e conomic e ffi ciency i n the State own ed texti l e s ect or. substantial restructuring and polic y r eform is required. In respect t o this. the study identified spec ific areas that deserve the a ttention of policy makers and recommends the measure s to be taken.



Economic Efficiency, Measuring in Ethiopia