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Has Privatization promoted Efficiency in Ethiopia?: A comparative Analysis Of Privatized Industries vis-a vis State Owned and other private Industrial Establishments

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  • Worku, Gebeyehu

Abstract

There has been still a debate about the efficacy of privatization for economic transformation of countries. Nonetheless, many developing countries including Ethiopia have privatized public owned enterprises as a manifestation of their commitment to implement the reform packages induced by multilateral institutions through the Structural Adjustment Program. The proponents for pro-privatization strongly argue that private enterprises operate more efficiently than those that are owned by the state. The main objective of this paper is, therefore, to assess the extent to which privatized industries operate more efficiently as compared to those that remain under the public domain and other private industries. A Cobb-Douglass stochastic frontier production function is estimated for the group and separately for privatized industries. The econometric result revealed that the average technical efficiency for the whole sample was about 73.4% during the period 1998/99- 2001/02. Privatized industries were found relatively inefficient with a score of 69%, while public and other private industries reported 75% and 71%, respectively. It was also found that efficiency of privatized enterprises continuously declined during the same period. It is an indication, at least in the Ethiopian context, that privatization may not necessarily ensure efficiency gain. Thus, government should revitalize its hasty move towards transferring public enterprises to private hands.

Suggested Citation

  • Worku, Gebeyehu, 2005. "Has Privatization promoted Efficiency in Ethiopia?: A comparative Analysis Of Privatized Industries vis-a vis State Owned and other private Industrial Establishments," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 9(2), pages 132-132, May.
    • Handle: RePEc:ags:eeaeje:250056
    DOI: 10.22004/ag.econ.250056
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    References listed on IDEAS

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    1. Osama J. A. R. Abu Shair, 1997. "Privatization and Development," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-25374-6, September.
    2. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    3. Kate Bayliss & Ben Fine, 1998. "Beyond Bureaucrats in Business: a critical review of the World Bank approach to privatization and public sector reform," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(7), pages 841-855.
    4. Paul Cook, 1997. "POLICY ARENA: Privatization, Public Enterprise Reform and the World Bank: Has 'Bureaucrats in Business' Got It Right?," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(6), pages 887-897.
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    Cited by:

    1. Worku Gebeyehu, 2011. "Causal Links among Saving, Investment and Growth and Determinants of Saving in Sub-Saharan Africa: evidence from Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 19(2), November.

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