Firm-Level Efficiency in the Non-Traditional Exports Sector in Ghana

Abstract

The level of efficiency and dynamism of the emerging non-traditional exports sector is important to Ghana's quest to accelerate economic growth in order to achieve middle-income status. The potential of the non-traditional exports sector to break into the dominance of the traditional exports sector and to enhance the diversification of, and deepening of, the total exports sector is observed by stakeholders. This can, however, be achieved if the non-traditional exports sector exhibits an appreciable level offrrm-Ievel efficiency. The study estimates frrm-level technical efficiency of NTE sector firms in Ghana using a crosssectional data of sixty firms. The data, made up of both qualitative and quantitative, were directly collected from the selected frrms during a survey conducted for this purpose. The data collected comprised value of annual turnover (sales), annual cost of raw materials, end-of-year book value of fixed assets, annual cost of energy, and annual cost of labour, for the year 2007. The frrms also provided information characterizing them as well as their export and/or non-export operations. The study fits Cobb-Douglas and Translog functional forms of production to the data collected. Based on the Likelihood Ratio Test, it was ascertained that the Cobb-Douglas fit the data better than the Translog. Technical efficiency scores were estimated and regressed on frrm specific variables to identify those that influence efficiency in the NTE sector. These efficiency scores, in terms of percentages, ranged from as little as 34 per cent to 95 per cent, and averaged 80 per cent. This implies that the NTE sector firms are efficient.