IJSRP, Volume 7, Issue 1, January 2017 Edition [ISSN 2250-3153]
Any production unit inspires efficiency, because it leads to profitability. The purpose of the study was to evaluate relative Efficiency and TFP of MSEs operating in three sample Towns in Buno Bedelle and Ilu Aba Bor Zones during the year 2013 and 2014. Three input variables - Plant Asset, intermediate variables and number of employee, and one output variable – Net Sales, were selected. Output-orientation DEA BCC-model was used to measure the relative technical efficiency and DEA-MPI to measure the productivity changes over time. The results revealed the average TE score of 0.492, which implies that the sample MSEs on average technically inefficient. It also indicates that the major source of inefficiency during the study period on average comes from pure technical inefficiency which meant primarily due to managerial inefficiency in selecting optimal selection of resource allocation. The study also reveals that the average TFP change is 0.836 during the year2014 which implies productivity regress. Technical efficiency regress takes the most contributions to the loss of TFP. Regression in Technical efficiency indicates a great potential for the MSEs to increase productivity through effective utilization of resources and filling knowledge dispersion among managers through different capacity building mechanism.