Determinants of labour productivity in Zambia's manufacturing Firms

Abstract

This paper investigates the determinants of labour productivity at firm level in Zambia’s manufacturing sector, using panel data for the period 2006 to 2010 for 324 firms.The study is worth undertaking because labour productivity (LP) is a determinant of firm competitiveness and profitability. The study uses Hausman-Taylor technique to estimate a modified Cobb-Douglas production function, as in the study by Corvers F. (1997), for each category of firms; micro, small, medium and large. Stata Version 11 is used to analyze the data. The study results show that firm size, skill and education, capital and wage have a positive influence on LP across all firm categories. The results further show that employment growth in a firm reduces LP across all firm categories. Finally, foreign ownership, export orientation, industry age, research and development are all insignificant across all firm categories, and therefore do not influence LP in Zambia’s manufacturing firms. The study concludes that human capital variables (skill and education), firm size, capital and wage are key drivers of labour productivity in Zambia’s manufacturing firms and hence policies aimed at improving the sector’s productivity and competitiveness should be aligned to target relevant variables identified in the study.