Macroeconomic and Structural Adjustment Policies in Zimbabwe

By Clever Mumbengegwi | Go to book overview

13
Macroeconomic Policies and the Manufacturing Sector

HansBjurek, DickDurevallandDanielNdlela


1 Introduction

Zimbabwe constitutes a good case for evaluating the impact on productivity of a change from import substitution to market-oriented policies. It has a very well-developed manufacturing sector, which at the end of the 1980s contributed over 25 per cent to GDP and produced about 7000 different products. Before the implementation of the structural adjustment program (ESAP) in 1991, controls were widespread. The overwhelming majority of firms produced under conditions where there was no foreign or domestic competition. Moreover, foreign exchange rationing severely constrained access to imports of machinery, spare parts and raw materials, resulting in chronic breakdowns and low capacity utilization ( Riddell, 1988). Hence liberalization in general, and trade reform in particular, should have had a strong impact on productivity.

In this chapter we first examine how macroeconomic policies impacted on the manufacturing sector over two distinct periods: the inward-looking macropolicies of the 1980s and the outward-oriented policies of the 1990s. The aim is to classify and identify the set of policies that will promote growth, competitiveness and the acquisition of appropriate technologies by firms.

In the second part of this chapter we analyze if ESAP contributed to an increase in total factor productivity in the manufacturing sector. In order to do this we first estimate indexes of total factor productivity for 31 manufacturing sub-sectors for the period 1980–95. Total factor productivity is measured with Malmquist productivity indexes, obtained by a non-parametric (DEA) approach. Following this, we use panel data methods to test for the effects of trade reform and other variables related to the ESAP, such as foreign aid and imports, on total factor productivity growth, while controlling for exogenous variables. This two-step procedure is used because the sub-sectors are heterogeneous and have their own specific technology.

The following section evaluates the role of macroeconomic policies during the 1980s and 1990s. Section 3 presents the methodology used to measure

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