Theoretical and empirical literature points to substantial heterogeneity in the response of firms to changes in the economic environment. In most cases research has focused on firm decision making within middle- and upper-income economies, with few studies on low-income countries (LICs), where data are less available. Heterogeneous firm responses are believed to underpin the extreme decline in output of the Zimbabwean economy over the past two decades. From 2000 to 2009, the Zimbabwean economy collapsed in the face of hyperinflation and severe macroeconomic imbalances. Real GDP fell by 45 percent from 2000 to 2009. The heterogeneous nature of these shocks and the heterogeneous nature of firms present a unique opportunity to evaluate firm responses to economic crises.
The project analyses a Tracer Survey of Zimbabwean manufacturing firms surveyed under the Regional Programme on Enterprise Development (RPED) programme in Zimbabwe over the period 1993 to 1995. The Tracer Survey provides information on changes in ownership across time, exit from production activities, including manufacturing activities and entry and exit into trading and/or services activities within these firms over the past two decades. By overlapping these firm ‘events’ with specific economic crises during the period of analysis, the study provides a deeper understanding of how economic crises impact upon firm behaviour and firm survival.
This study investigates how firms have so far responded to policies such as indigenization policies, labour market regulations (especially regarding the retrenchment costs) and land reform initiatives. It will therefore enable better insights for policymakers and academics on the mechanisms through which future economic policy may affects manufacturing firms in Zimbabwe. The insights from the project are also relevant for other LICs that commonly experience periods of economics crisis.
