Determinants of production performance of Wonji Shoa Sugar Factory

The study applied OLS estimation technique on a log-linear production function using time series data from 1979 to 2010. By implementing general to specific modeling strategy and error correction model; the study found out that, physical capital and land size have positive impact on current production and negative impact on the production five years later. Labor has a negative impact on current production and positive impact on the production five years later. Fertilizer has positive impact on the production performance of the industry. All the coefficients are statistically significant at 5% level of significance except physical capital which is insignificant in the short run error correction model. The variables inflation and rain are found to have no impact on the production performance and are dropped out of the model through the general to specific model specification strategy.