Efficiency of Ethiopian Garment Factories. Evidence from Addis Ababa

Table of Contents

1. Introduction

1.1. Background

1.2. Problem Statement

1.3. Objective

1.3.1. General Objectives

1.3.2. Specific Objectives

1.3.3. Research question

1.4. Research hypotheses

1.5. Significance of the study

1.6. Scope and limitation of the study

1.7. Organization of the Paper

2. LITERATURE REVIEW

2.1. Theoretical review

2.2. Empirical review

3. Methodology, Model Specification and Description of variables

3.1. Sources of Data

3.2. Sampling design

3.3. Description of Variables

3.3. Specification of Econometric Model

3.3.1. Parametric approach

3.3.2. Non Parametric approach

3.4. Identifying sources of technical inefficiency

3.5. Conceptual framework garment factories technical efficiency

4. Result and Discussion

4.1. Characteristics and production performance of garment factories in Ethiopia

4.2. The technical efficiency level of garment factories

4.3. Comparison of technical efficiency level by market orientation

4.3.1. Comparison of DEA and SFA result by owner’s citizenship

4.4. Econometric analysis results

4.4.1. Hypothesis testing and Model selection

4.5. Determinates of technical efficiencies

5. Conclusion and Recommendation

5.1. Conclusions

5.2. Recommendations

Research Objectives and Themes

This thesis aims to assess the technical efficiency of garment factories in Addis Ababa, Ethiopia, and to identify the specific factors that influence their operational efficiency. The study seeks to address the gap between current output levels and potential maximum output, specifically investigating if export orientation impacts efficiency and what role various operational variables play in factory performance.

• Measurement of technical efficiency using Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA).
• Comparative analysis of efficiency between local market-oriented and export-oriented garment factories.
• Identification of determinants of technical inefficiency across different factory scales.
• Evaluation of the impact of production management, input sourcing, and collaboration on factory productivity.
• Assessment of the applicability of different econometric models (Cobb-Douglas vs. Translog) for the Ethiopian garment sector.

Excerpt from the Book

Summary of Chapters

Introduction: Provides the background of the Ethiopian textile and garment sector, defines the problem statement regarding its competitiveness, and outlines the research objectives and hypotheses.

LITERATURE REVIEW: Summarizes existing theoretical frameworks on productivity and technical efficiency, and discusses empirical studies conducted in various countries regarding industrial efficiency.

Methodology, Model Specification and Description of variables: Details the primary data collection methods, the use of DEA and SFA models, and defines the variables and conceptual framework used for analysis.

Result and Discussion: Presents descriptive statistics of the studied factories, compares technical efficiency scores across different segments, and provides the results of the econometric analysis.

Conclusion and Recommendation: Summarizes the findings of the study and offers policy recommendations to improve the technical efficiency of the Ethiopian garment industry.

Keywords

garment factories, stochastic frontier analysis, data envelopment analysis, technical efficiency, Ethiopia, manufacturing sector, Cobb-Douglas, productivity, export orientation, econometric modeling, industrial policy, labour efficiency, production management, input utilization, Addis Ababa

Frequently Asked Questions

What is the core focus of this research?

The research primarily evaluates the technical efficiency of garment factories located in Addis Ababa, Ethiopia, and seeks to identify the factors that contribute to technical inefficiency within the sector.

Which methodologies are employed to measure efficiency?

The study utilizes both Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) to provide a robust comparison of efficiency scores and to identify determinants of inefficiency.

What is the primary objective of this thesis?

The main objective is to assess the production performance of garment factories and determine whether specific operational variables, such as export orientation or management level, influence technical efficiency.

How is the production function modeled?

The study compares Cobb-Douglas and Translog production functions and uses Akaike Information Criteria (AIC) to select the best-fitting model for the data, ultimately preferring the Cobb-Douglas function.

What does the study cover in its main body?

The main body covers the characteristics of the garment factories, a comparison of efficiency levels based on market orientation and size, and an econometric analysis of the determinants of technical efficiency.

What are the characterizing keywords of this work?

Key terms include garment factories, stochastic frontier analysis, data envelopment analysis, technical efficiency, and industrial productivity in the Ethiopian context.

Why did the study reach different conclusions using DEA and SFA?

The models give different results because DEA creates its own envelope to compare firms, which tends to make large firms appear more inefficient compared to a concentrated cluster, whereas SFA splits the residual into inefficiency and error terms.

Does export orientation improve factory efficiency?

The research indicates that, contrary to expectations, exports do not significantly promote technical efficiency in Ethiopian garment factories, as they are not currently competing effectively in the international market.

How should the industry improve according to the author?

The author recommends that large and medium-scale firms focus on improving wage rates and manager education, while small-scale firms should focus on local fabric sourcing and collaboration with similar factories.