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Privatization and Technical Efficiency: Evidence from the Manufacturing Sector in Malawi
Author(s) -
Chirwa Ephraim W.
Publication year - 2001
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/1467-8268.00040
Subject(s) - data envelopment analysis , industrial organization , competition (biology) , sample (material) , panel data , frontier , economics , technical progress , business , manufacturing sector , private sector , productive efficiency , capital (architecture) , microeconomics , labour economics , macroeconomics , econometrics , production (economics) , economic growth , mathematical optimization , ecology , chemistry , mathematics , chromatography , biology , history , archaeology
This study evaluates the impact of privatization on the technical efficiency of six privatized enterprises, three state‐owned enterprises and six private enterprises competing in three oligopolistic manufacturing industries in which privatization took place between 1984 and 1991 using panel data between 1970 and 1997. Technical efficiency scores are computed using Data Envelopment Analysis (DEA) based on the ‘intertemporal frontier’ approach for panel data. The results show that privatization in Malawi is associated with high mean technical efficiency in privatized enterprises and competing state‐owned enterprises and private enterprises. If we account for other sources of technical efficiency, in the full sample we find evidence that the competitive process is more important than privatization in increasing the technical efficiency of all enterprises competing in the same industries. However, the results of the subsample of privatized enterprises show that privatization significantly increases the technical efficiency of privatized enterprises, although we cannot ignore the role of domestic competition, capital intensity, multinationality and structural adjustment programmes as sources of technical efficiency.