Muchai, Diana N.Gachanja, Paul MwangiNdicu, Simon2015-03-192015-03-192015http://ir-library.ku.ac.ke/handle/123456789/12398Masters in Economics-Department of Econometrics and Statistics, 64p. June , 2015This study will seek to provide empirical evidence on technical efficiency of the Kenya Agro-processing industry. Agro processing is the process or action taken by manufacturers of converting primary (raw) agricultural products into consumable commodities suitable for consumption. This subsector is involved in processing, packaging and value addition of the fresh agricultural produce produced through activities of farming , livestock keeping and forestry by the Kenya Agricultural sector of tea, coffee, sugar cane, fruits, vegetables, milk, Honey, meat, grains and barley .The major problem of the Agro-processing industry is that it has been inefficient in terms of value addition to these agricultural produce and Kenya is known to be a net exporter of raw agricultural produce instead of high quality value added products .This study will seek to determine the efficiency estimates of the agro-processing industry and analyze the trend in efficiency changes under the period under consideration .There after policy recommendation for the agro-processing industry will be provided. Panel data covering three year (2011, 2012, and 2013) for 30 firms in the Agro-processing industry will be collected from the ministry of industrialization, Kenya daily board, Kenya sugar board, KTDA, KNBS and EPZ departments for the said periods. This study will treat salary and wages, plant equipment and machinery and raw materials as the input variables while the net sales of the firms will be the output variable .Econometric production frontiers will be estimated for the Agro-processing industry in each period and the analysis will be done based on results of the stochastic frontier analysis. Technical efficiency of the Agro-processing industry will be computed from the results of the estimated stochastic frontier model and changes in technical level will be observed over time and between the beverage subsector, food subsector and the non-food sub sector .The findings of this study will be used to draw sound conclusions and recommendations that will be very useful to enable efficient resource allocation and cost of production minimization to the firms and to the policy makers of the Kenya ministry of industrialization and enterprise developmentenThesis