Microeconomic adjustment during structural reforms: The Nicaraguan manufacturing sector, 1991-1995

The rationale for the implementation of structural reforms favouring free markets is that, through increased competition, they would create incentives to improve the ways firm operate, i.e. firm efficiency. In this study we measure and analyze total factor productivity and technical efficiency in a large sample of Nicaraguan manufacturing firms. Our analysis indicates that whereas structural reforms may be necessary conditions for the development of developing economies, their expected positive effects on sources of growth, such as total factor productivity and technical efficiency, could be so slow that it may be necessary to develop sufficient conditions or policy instruments to spur economic growth in the short run.