Productivity and Efficiency Analysis of Pakistani Textile Industry using Malmquist Productivity Index Approach

Abstract

The key purpose of this study is to evaluate the total factor productivity of the textile sector by using DEA (Data Envelopment Analysis) and also identifying the components which play a significant role in the growth of productivity. This paper examines productivity performance of the Pakistan’s textile manufacturing industry using firm-level panel data of a total of 64 firms for the period 2011-2015. Moreover, the sources of expansion and compression in output are recognized for the whole textile industry as well as for the three sub sectors comprising of 35 firms from spinning, 21 from composite and 8 from weaving textile sector. Empirical results suggest that total factor productivity growth of composite, spinning and weaving textile sectors are not presenting skewed distribution. Moreover, the component of technological change had a negative impact on spinning textile sector. Technical efficiency and technological change, both, had a positive impact on the productivity of composite and weaving textile sectors. Overall, the spinning textile sector has no contribution in the productivity growth. A critical evaluation of the production factors is necessary for the maintenance of the performance of the organization. This paper provides information to the decision makers and policy makers about the allocation, acquisition and anticipation of the resources. To eradicate the industry’s pitfalls, textile sector in combination of subsectors has been selected providing a comparative analysis of the efficiencies adding to the existing body of literature by detecting the primary zones for improving productivity performance in Pakistani textile manufacturing as the pure efficiency component.

Keywords

• textile sectors
• total factor productivity
• malmquist index approach
• nonparametric approach