World Journal of Current Economics Research

Vol. 2, No. 1, May 2016

Table of Contents


Stochastic Frontier Analysis of Production Technology: An Application to the Pharmaceutical Manufacturing firms in Ghana

Authors: Johnson Addai-Asante, Samuel Sekyi

Pages: 1-20


The aim of this study was to find out the level of technical efficiency of pharmaceutical manufacturing firms in Ghana and analyse the factors that determine their efficiency level. A survey based on questionnaire administration was applied to collect data from the entire population of pharmaceutical manufacturing firms numbering 39 across the country. A stochastic frontier analysis based on the Cobb-Douglas production functional form was applied to estimate the technical efficiency of production among firms. Subsequently, the ordinary least square (OLS) was used to determine the factors that influenced technical efficiency levels of firms. The findings show that technical efficiency level among firms range between about 34% and 62% with the mean technical efficiency level of 50%. In addition, the results show that percentage of professionals employed by firms, the ages of firms’ plants and the number of maintenance exercises by firms significantly determined their technical efficiency level. Furthermore, capital and skilled labour had greater positive impacts on output levels of capsules and tablets produced. It is recommended that firms invest more in their capital stocks through replacement of old machines with new ones and ensuring regular maintenance of equipment. Firms should also employ more professionals and improve upon the technical know-how of existing workforce through in-service training. These will make them operate closer to their potential frontiers (more technically efficient) so as to be more cost effective and competitive.

Keywords: Technical Efficiency, Pharmaceutical ManufacturingFirms, Cobb-Douglas Production Function, Stochastic Frontier, Determinants, labour, capital
















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