LABOR USE EFFICIENCY OF ETHIOPIAN AIRPORTS

Abstract

This study analyses labor use efficiency of Ethiopian airports using an input requirement function approach. The study considers panel data for 13 international and domestic airports covering the period 2002-2017. The fixed effects, a multi-step model of separating persistent and transitory inefficiency, and maximum likelihood estimation techniques are used for estimating the airports’ labor use efficiency. The study concluded that labor use and airport output were complementary hence expansion of airport facilities is recommended. Capital, energy, and maintenance and repair inputs substitute labor use. The efficiency results vary according to the models’ underlying assumptions. The average labor use efficiency of the fixed-effects, multi-step and maximum likelihood methods are 47.52, 49.60 and 50.59% respectively. Despite these minor differences, many domestic airports performed relatively better compared to international airports. Thus, deployment of resources above the minimum requirements should be reconsidered as a source of cost reduction. The airports with high persistent inefficiency will continue to remain inefficient which may necessitate structural changes and revision of employment and labor use policies so as to increase their labor productivity.