Has Low Productivity Constrained Competitiveness of African Firms? : Comparison of the Firm Performances with Asian Firms
December 2007, revised October 2008
It has been argued that the slow growth of productivity is one of critical sources of stagnation of the African manufacturing sector but empirical supports are limited. Using the inter-regional firm data of the garment industries, productive efficiency and its contribution to unit costs are compared between Kenya and Bangladesh which is the one of the largest exporters in the world. Our estimates have indicated that there is no clear gap in the average technical efficiency of the two industries despite conservative estimation, while allocative efficiency is significantly lower in the Kenyan industry. Unit costs greatly differ between the two industries, where impact of inefficiency on unit costs is small and labour cost appears to have the largest impact. Productivity accounts little for the stagnation in the garment industry.
Keywords: technical efficiency, allocative efficiency, manufacturing, sub-Saharan Africa
JEL classification: D24, L67, O33
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