Technical Efficiency and its Determinants of Leather and Leather Products of Pakistan: A Data Envelopment Analysis

Abstract

The present study measures the technical efficiency and analyses the determinants of technical inefficiency of leather and leather products of Pakistan. The data has been collected from 102 firms by utilizing a structured questionnaire for the year 2017. The study has employed a non-parametric Data Envelopment Analysis (DEA), Tobit Regression Model and Ordinary least square method (OLS as methodologies, the former to measure technical efficiency, while the latters to examine the determinants of technical inefficiency. The findings of the study reveal that the mean technical efficiency score is 0.83, with minimum level is 0.239 and the maximum level is 1. The results of Tobit and OLS method illustrate that the school education of the owners had a positive impact, while experience, training, technology and age of the owners had a negative impact on technical inefficiency of leather and leather products in Pakistan during the selected time span. The study suggests that Pakistan should make out a comprehensive plan for the guidance of the labour force, the management of the firms and the provision of advanced techniques required by the industry of leather and leather products.