The name is absent

structural weaknesses may severely constrain the capacity of individual firms to respond to the
new set of incentives. For Gabon and Chad there are reasons to suspect that this may be
indeed the case. In both countries, most manufacturing firms cater exclusively to the domestic
markets. Only a handful of firms export a significant share of their output. Moreover, while export-
oriented firms are relatively large, they tend to export only a limited fraction of their total
production. Under these circumstances, exchange rate devaluation may have only limited effects
on the industrial sector unless it triggers either a significant response by existing exporters or a
flow of new entries of firms catering to foreign markets. Moreover, the high commodity
concentration and the early processing stage of export flows may work to hamper the overall
price response. In the next section, therefore, we take a close look at the firm level response
drawing on a special survey.

3.    FIRM-LEVEL CHANGES IN RELATIVE PRICES

Manufacturing firms in Chad and Gabon were surveyed² to collect information on the
values and quantities of their five major inputs and five major outputs in the fiscal years 1992-93
and 1995-96. Information was also collected on a set of firms’ characteristics, performance and
constraints to growth for the period 1992-93 to 1995-96. The three-year period was chosen so
as to encompass information preceding the devaluation and trade reforms and the most recent
complete fiscal years following the reforms.

3.1 Nature of the Sample

² All types of manufacturing firms were targeted, foreign and domestically owned private and public
ownership, large and micro size firms. To qualify for inclusion ni the sample, a firm had to be a
manufacturing firm and have at least one full time employee in addition to the owner.

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