Shaking Out or Shaking In: The Impact of Zimbabwe's Economic Crisis on the COuntry's Manufacturing Sector Allocative Efficiency

Working paper 749
Author(s): 
Nicholas Masiyandima & Lawrence Edwards
Publication date: 
June, 2018
Classification-JEL: 
Zimbabwe had one of the world's worst economic crises from the late 1990s to 2009. The crisis encompassed a nancial sector crisis, severe adverse investment and demand shocks and idiosyncratic rm and industry interventions by government. On the basis of the resource misallocation hypothesis, the study investigates the effects of the shocks on within industry resource allocation effciency for the country. Using the country's manufacturing firm data before and after the crisis and comparable data for two comparator countries, Ghana and Kenya to estimate the potential productivity eects of the crisis, there is evidence suggesting a deterioration in the country's within industry resource allocation effciencies, with the country estimated to have lost at least 20 and 32.8 log points in potential firm productivity, respectively, against its pre crisis and its comparator countries productivity, with the allocative ineciency persisting into the post crisis period.
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