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Determinants of Efficiency in Least Developed Countries: Further Evidence from Nepalese Manufacturing Firms

  • Edward Oczkowski
  • Kishor Sharma

Using a translog stochastic production frontier and maximum likelihood econometric methods, we estimate and model the determinants of firm level efficiency in the Nepalese context. Our results are broadly in line with theoretical expectations. We find that large firms are more efficient and that a higher capital intensity leads to inefficiency. There is no statistical evidence to suggest that foreign participation leads to efficiency improvements. Also, we do not observe any link between export intensity and efficiency improvement. We find that higher protection leads to inefficiency. Overall, our results suggest that an outward looking industrial strategy, which relies on less intervention and permits the development of large-scale industries, is conducive to efficiency improvement in least developed countries (LDCs) like Nepal.

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Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

Volume (Year): 41 (2005)
Issue (Month): 4 ()
Pages: 617-630

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Handle: RePEc:taf:jdevst:v:41:y:2005:i:4:p:617-630
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  1. Sharma, K., 2000. "Liberalization and Structural Change: Evidence from Nepalese Manufacturing," Papers 812, Yale - Economic Growth Center.
  2. Kishor Sharma & Sisira Kumara Jayasuriya & Edward Oczkowski, 1997. "Liberalization and Productivity Growth: The Case of Manufacturing Industry in Nepal," Working Papers 1997.16, School of Economics, La Trobe University.
  3. George E. Battese, 1997. "A Note On The Estimation Of Cobb-Douglas Production Functions When Some Explanatory Variables Have Zero Values," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 250-252.
  4. Dani Rodrik, 1992. "The Limits of Trade Policy Reform in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 87-105, Winter.
  5. Wilson, Paul & Hadley, David & Asby, Carol, 2001. "The influence of management characteristics on the technical efficiency of wheat farmers in eastern England," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 24(3), March.
  6. Pack, Howard, 1984. "Productivity and technical choice : Applications to the textile industry," Journal of Development Economics, Elsevier, vol. 16(1-2), pages 153-176.
  7. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  8. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  9. Nishimizu, Mieko & Robinson, Sherman, 1984. "Trade policies and productivity change in semi-industrialized countries," Journal of Development Economics, Elsevier, vol. 16(1-2), pages 177-206.
  10. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
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