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Estimating and analysing cost efficiency of sawmill industries in Nigeria

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  • Kolawole Ogundari

Abstract

Purpose - The purpose of this paper is to examine cost efficiency and its determinants in Nigerian sawmill industries. Design/methodology/approach - A stochastic frontier model is employed on a total of 160 mills randomly selected across five states in south‐western Nigeria in 2006. Findings - The results show an estimated average cost efficiency of 1.262. This suggests that an average mill incurs about 26 per cent costs above the frontier cost when processing planks from logs. Further analysis indicates that a significant level of cost ineffisciency is present in Nigeria's sawmilling industry. Analysis of determinants of cost efficiency reveals that more years of education, experience, age, and level of capital investment reduce cost inefficiencies between 7 and 16 per cent. Sawmill operation is found to be associated with economies of scale in the study area. Originality/value - The paper contributes to existing studies on the efficiency of sawmill industries in Nigeria by taking a holistic assessment of the industry from a cost perspective.

Suggested Citation

  • Kolawole Ogundari, 2010. "Estimating and analysing cost efficiency of sawmill industries in Nigeria," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 2(4), pages 420-432, November.
    • Handle: RePEc:eme:caerpp:v:2:y:2010:i:4:p:420-432
    DOI: 10.1108/17561371011097731
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    References listed on IDEAS

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    1. Wilson, Paul & Hadley, David & Asby, Carol, 2001. "The influence of management characteristics on the technical efficiency of wheat farmers in eastern England," Agricultural Economics, Blackwell, vol. 24(3), pages 329-338, March.
    2. Johannes Sauer & Klaus Frohberg & Henrich Hockmann, 2006. "Stochastic efficiency measurement: The curse of theoretical consistency," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 139-166, May.
    3. Ryan, David L. & Wales, Terence J., 2000. "Imposing local concavity in the translog and generalized Leontief cost functions," Economics Letters, Elsevier, vol. 67(3), pages 253-260, June.
    4. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    5. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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    Cited by:

    1. Majiwa, E. & Mugodo, C., 2018. "Technical efficiency and technology gap ratios among rice farmers in Kenya," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277209, International Association of Agricultural Economists.

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