Performance Rating of Privatized and Non-Privatized Firms Using Data Envelopment Analysis Technique

Abstract

This paper examined the technical efficiency of Libyan manufacturing firms over the 2000 to 2008 time period. The study used the Data Envelopment Analysis (DEA) technique to analyze production efficiency of firms before and after privatization. An inefficiency model is estimated to link the inefficiency of inputs or resources used to produce output to other factors such as ownership structure to justify the impact of privatization policy on efficiency. The results indicated that the average efficiency score before privatization was 49.5 percent, but the score improved to 62.3 percent after privatization.  The increase of 12.8 percent indicates that on average there is only minor improvement in technical efficiency of firms after privatization. Nevertheless, this increase was not statistically significant. The results also indicated that there were no evidences to suggest that there are differences in efficiency levels of firms before and after privatization policy, and efficiency is a function of ownership structure.

Keywords: Libya, Data Envelopment Analysis, technical efficiency, ownership, privatization