Technical efficiency of olive oil manufacturing and efficacy of modernization programme in Tunisia

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.