An assessment of efficiency and productivity analysis of manufacturing industries in Bangladesh

Abstract

This empirical study employs stochastic frontier analysis to evaluate the Total Factor Productivity (TFP) growth and technical efficiencies of the manufacturing sector in Bangladesh. The study draws data from five rounds of surveys conducted between 1982/83 and 2012. TFP growth is decomposed into efficiency growth, scale component, and technological progress to identify the sources of growth. The technical efficiency of the manufacturing industries in Bangladesh averages 80%, with export-oriented industries exhibiting higher efficiency than non-export industries. Small-scale industries show higher TFP growth than medium- and large-scale industries. The study estimates the TFP growth in Bangladesh's manufacturing sector at approximately 5.5% during the review period, with technological progress being a key driver of growth. The results also indicate TFP growth convergence over time among the manufacturing industries in Bangladesh. The study highlights the potential for productivity improvement and income growth in Bangladesh's manufacturing sector. Further investigation into TFP and efficiency is necessary to achieve this potential fully. The study's findings suggest that policymakers in Bangladesh should focus on promoting technological progress and improving the efficiency of manufacturing industries, especially in medium- and large-scale industries. Moreover, the government should develop policies that support export-oriented industries to improve their efficiency.