Measuring Economic Efficiency: A Case Study of State Owned Textile Industries in Ethiopia.
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Date
1987-09
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A.A.U
Abstract
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.
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Keywords
Economic Efficiency, Measuring in Ethiopia