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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The Impact of Currency Depreciation on Production Techniques in Zimbabwe's Manufacturing Sector
Author:Muzulu, JosephISNI
Year:1994
Periodical:Development Policy Review
Volume:12
Issue:2
Period:June
Pages:211-224
Language:English
Geographic term:Zimbabwe
Subjects:modes of production
devaluation
industry
Development and Technology
Economics and Trade
External link:https://doi.org/10.1111/j.1467-7679.1994.tb00064.x
Abstract:It is widely asserted that real exchange-rate depreciation removes distortions in factor prices that tend to favour capital-intensive production techniques in most less developed countries, thereby encouraging firms to become more labour-intensive or providing an advantage to labour-intensive firms. This article examines the extent to which the manufacturing sector in Zimbabwe has adjusted to more labour-intensive techniques following the consistent real depreciation of the Zimbabwe dollar since 1985. The first section of the article briefly outlines Zimbabwe's exchange-rate policy since 1980, while the next section examines the question of whether the prices of imported capital goods in the manufacturing sector rose faster than the price of labour following the sustained real depreciation of the Zimbabwe dollar. The extent to which the sector shifted to more labour-intensive techniques following the above relative price movements is then tested by calculating the coefficients of production. The hypothesis using firm-level evidence is then examined and the article goes on to analyse the extent to which labour-intensive firms increased employment levels faster than capital-intensive firms following the real exchange-rate depreciation. Other possible reasons for the observed results are also considered. Bibliogr., notes, ref., sum.
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