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Abstract
This study investigates firm level technical efficiency of production and its determinants
in a sample of 137 olive oil manufacturing firms in Tunisia using a stochastic frontier
production model applied to cross-section data. Results indicate that technical efficiency
of production in the sample of olive oil manufacturing firms investigated ranges from a
minimum of 47.1% to a maximum 99.5% with an average technical efficiency estimate
of 86.5%. This implies olive oil manufacturing firms in Tunisia can increase their
production on average by 13.5% through more efficient use of technology and production
inputs. The fact that 93 firms represented more than 64.4% of the sample hit more than
80% of technical efficiency score implies the efficacy of modernization programme
implemented in Tunisia. The estimated coefficients in the technical inefficiency effects
model indicate that level of technology, frequent use of computer and internet, the
owner’s age, the share of skilled labour, the employment of management staff, and the
input sourcing by the own production have a significant and positive effect on technical
efficiency. On the other hand, negative relationships are found between technical
efficiency and entrepreneur dummy variable, continuous relationship with the suppliers
in the same district, and with the private sector and trader as customers. These results
imply that the adoption of new technology, accumulation of skill and knowledge as well
as stable input sourcing contribute to improve the technical efficiency of olive oil
manufacturing.