Technical Efficiency Analysis of the Ethiopian Leather Sector
No Thumbnail Available
Date
2009-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
A.A.U
Abstract
This study aims at determining the level of technical efficiency of the Ethiopian tanneries and
leather foot wear industries over time using stochastic frontier productionfilllction model. All
the parameters of the frontier fimction alld the inefficiency model have been estimated
simultaneously using Maximum likelihood estimation. The study considered II tanneries and
28 leather foot-wear industries for the period of 2003-2007. The empirical result indicates
that the trans log fill1ctional form with maximum likelihood estimation better explains the
production behaviour of tanneries as well as leather foot-wear industries. It shows that there
is significant technical efficiency difference among industries in the sector. The mean
technical efficiency of tanneries was 0.77, showing an increasing trend. Poor quality of hides
and skins and poor technology are the main constraint of the sector. Among tannelY
industries, those producing more value-adding products have better efficiency and scale of
operation. The average efficiency of leather footwear industries was 0.84, with an increasing
trend. Moreover exporting leather footwear industries have better efficiency and scale of
operation as compared to non-exporting industries mainly attributed to the production of
better quality of product. External constraints including lack of modern marketing skill and
financial resources alld unfair competition in the domestic market with cheap and less quality
of imported products contribute more to the low level of development of the sector. In order
to effectively utilize the potential livestock resource and benefit.liĀ·om the good reputation oj"
the leather of the country, efforts have to be made in improving quality of raw hides,
infi"OStructure development, technical and skill development and availability of updated
marketing information system. The creation of conducive business environment enhances the
sector's development and promotes the competence in the global market competition.
Keywords: Leather sector, stochastic production function, technical effici ency, Ethiopia
JEL Classification: D24, L25, L67.
Description
Keywords
Technical Efficiency, Leather Sector