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GTAP Resource #3240

"Technical and Environmental Efficiency of Kenya’s Manufacturing Sector: A Stochastic Frontier Analysis"
by Kamande, Mercyline


The overexploitation of environmental resources for production purposes has become a major source of environmental degradation threatening the entire ecosystem. For the manufacturing sector, overdependence on fossil fuel for production makes it a significant contributor to environmental degradation. The technical efficiency of firms should therefore not only be defined from an economic perspective but also from an environmental perspective. This study estimates the technical and environmental efficiency of Kenya’s manufacturing sector using a stochastic frontier approach. Further, it explores the causes of variations in environmental efficiency across firms and seeks to establish the relationship between technical and environmental efficiency. It is evident that manufacturing firms in Kenya are generally technically inefficient as indicated by the magnitude of the technical inefficiency term, u which is 4.13, significant at 10%. Environmental efficiency measure is negative implying that firms are also environmentally inefficient. After accounting for variations in environmental efficiency across firms, the magnitude of technical inefficiency term, u, drops to 0.44. Technical inefficiency and environmental efficiency are inversely related implying that technical efficiency and environmental efficiency move together. The findings suggest that there is a gain in efficiency for firms when environmental concerns are incorporated in business objectives.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Not published
Date: 2010
Created: Kamande, M. (4/12/2010)
Updated: Batta, G. (5/20/2010)
Visits: 1,001
- Domestic policy analysis
- Trade and the environment
- European Union
- Commonwealth of Independent States

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