Measuring technical efficiency in Zimbabwe's manufacturing sector: a two-stage DEA Tobit approach

Abstract

This paper measures and explains efficiency of firms in Zimbabwe's manufacturing sector. The paper uses a panel of 166 firms from 6 subsectors of the manufacturing sector in the financial year 2014. The Data envelopment analysis program is used to measure efficiency and identify its determinants. Exporting, labour quality, size and firm age were found to enhance productivity. Efficiency was found to significantly vary with location with firms in Bulawayo being more efficient. This paper found no evidence of a relationship between foreign ownership and manufacturing productivity in Zimbabwe. By identifying factors that affect efficiency as well as measuring their impact on manufacturing efficiency this paper answers the bigger policy question: how to reindustrialise Zimbabwe following two decades of economic recession. Zimbabwe's manufacturing sector exhibits strong backward and forward linkages with other sectors of the economy. These interlinkages make manufacturing sector productivity growth relevant to the resuscitation and growth of the economy.