Allocative Efficiency for the Sustainable Production Process of the Seafood Industry in Bangladesh

Md. Shakil Ahmed, Khulna University
M Daud Ahmed, Manukau Institute of Technology
Nurun Naher Moni, Khulna University

Abstract: Seafood processing firms in Bangladesh are increasingly channelling their investment in modern technologies, but their production processes still remain manual or semi-automated because of an oversupply of unskilled and cheap labour. This research applies the Cobb-Douglas production function to measure the input-output relationship and the returns to scale of shrimp processing firms in the southwest region of Bangladesh. Approximately 80% of these companies have decreasing returns to scale whereas only a small proportion (20%) of them enjoys increasing returns to scale. The study shows that labour input is highly correlated with output in 60% of the firms and their marginal productivity is higher than the wage rate. Only 20% have the opportunity to invest in capital intensive techniques for efficient allocation of resources, and the remaining 20% exceed the optimal level of allocating resources in both labour and capital inputs. Estimated values of the marginal productivity of inputs indicate that none are efficient in allocating resources. This paper explores the opportunities for choosing the best techniques for achieving allocative efficiency in the sustainable production process of the seafood industry