Efficiency of Ethiopian Garment Factories: Evidence from Addis Ababa

The study measures the level of technical efficiency and its determinants in Ethiopian garment factories. The study employs both Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) to compute the technical efficiency of the factories and Tobit model to examine the determinant of technical inefficiency based on a date set of ninety four factories over the period of 2014-2015. The study used Akaike Information Criteria (AIC) to opt for the best function between Cobb-Douglas and Translog functions. The DEA estimation shows that the mean technical efficiency of the factories was around to be 0.43 while such figure in SFA goes as high as 0.89. The research recommends that output can be increased by improving the technical efficiency of Ethiopian garment factories.