Short-run decomposition of profit efficiency and its relationship with the Tunisian manufacturing capacity utilisation Online publication date: Wed, 23-Mar-2016
by Kamel Helali; Maha Kalai; Thouraya Boujelbene
International Journal of Applied Management Science (IJAMS), Vol. 8, No. 1, 2016
Abstract: This study investigated the measure of the quantity by which the profit of a one-output, multi-input firm deviates from a maximum short-run profit, and then the decomposition of this profit gap into its components. We examined this work and tried to apply it to the Tunisian manufacturing sector. We found a measure of the contribution of the unused capacity, the technical and the allocative inefficiencies to this profit gap. This study was carried out by presenting the measurement of the ray of the economic capacity which involves the short-run profit maximisation, with a constant output. Then we described how the gap between the observed profit and the maximum one can be calculated and decomposed using linear programming methods. Our empirical results, involving data on six sectors of the manufacturing industry during the period 1961-2010, suggest that the profit levels reach below the potential ones and the difference might be attributed to the unused capacity.
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