Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Efficiency of Micro and Small Enterprises in Ethiopia: Evidence from Data Envelope Analysis Model

Version 1 : Received: 8 October 2021 / Approved: 12 October 2021 / Online: 12 October 2021 (12:49:57 CEST)

How to cite: Ayele, A.B. Efficiency of Micro and Small Enterprises in Ethiopia: Evidence from Data Envelope Analysis Model. Preprints 2021, 2021100180 (doi: 10.20944/preprints202110.0180.v1). Ayele, A.B. Efficiency of Micro and Small Enterprises in Ethiopia: Evidence from Data Envelope Analysis Model. Preprints 2021, 2021100180 (doi: 10.20944/preprints202110.0180.v1).

Abstract

This study measures the technical and scale efficiency of Micro and Small Enterprises (MSEs) and input slacks using Data Envelop Analysis (DEA) model and identifies the determinants of efficiencies of MSEs by employing ordinary least square (OLS) econometrics model. A sample of 375 randomly selected MESs are included in the study. The study found that the average technical and scale efficiency of MSEs are relatively low; technical efficiency averaged at 30 percent and 38.4 percent under constant returns to scale (CRS) and variable returns to scale (VRS) assumptions, respectively. Besides, the overall average scale efficiency score of MSEs was estimated at 77.8 percent. The highest mean technical and scale efficiencies were registered in the construction (71.8 percent) and manufacturing (85.7 percent) sectors, respectively. Whereas, the lowest technical and scale efficiency goes to urban agriculture sector and service sector, with 38.9 percent and 67.2 percent, respectively. The level of inputs, enterprise age and sector, human capital, labor productivity variables significantly affect relative technical efficiency level of MSEs with different directions while variables such as start-up capital, gender of the enterprise manager and availability of support from the government identified statistically not significant in determining the MSEs’ technical efficiency.

Keywords

MSEs; Technical Efficiency; DMU

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