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Slow and steady wins the race : how the garment industry leads industrialization in low-income countries

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  • Fukunishi, Takahiro
  • Yamagata, Tatsufumi

Abstract

This paper investigates how the garment industry escapes this vicious cycle and argues for the validity of labor-intensive industry as a starting point for full-fledged industrialization, even though it might at first seem to be a digression from the path to an innovation-led economy. By examining original firm-level data on garment-producing firms collected in 2002 and 2008 in Bangladesh, Cambodia, Kenya and Madagascar, the following conclusions are drawn: (1) low wages, though still sufficient for poverty reduction, are the main source of competitiveness in low-income countries; (2) after the successful initiation of industrialization causes wages to begin to rise, there is still a possibility for productivity enhancement; and (3) skill bias in technological progress is not yet a major factor, implying that the garment industry is still a labor-intensive industry. In sum, labor-intensive industry should not be discounted as a part of the development strategy of low-income countries.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/1264/1/ARRIDE_Discussion_No.412_fukunishi.pdf
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Bibliographic Info

Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 412.

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Date of creation: Apr 2013
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Publication status: Published in IDE Discussion Paper. No. 412. 2013.4
Handle: RePEc:jet:dpaper:dpaper412

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Related research

Keywords: Developing countries; Bangladesh; Cambodia; Kenya; Madagascar; Apparel industry; Textile industry; Industrialization; International competition; Competitiveness; Garment; Race to the bottom;

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References

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  1. Gregory Clark, 2007. "Introduction to A Farewell to Alms: A Brief Economic History of the World
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  2. Amjad (edited), Rashid, 1981. "The development labour intensive industry in ASEAN countries: an overview," MPRA Paper 38967, University Library of Munich, Germany.
  3. Yamagata, Tatsufumi, 2006. "The Garment Industry in Cambodia: Its Role in Poverty Reduction through Export-Oriented Development," IDE Discussion Papers 62, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  4. Lawrence F. Katz & Kevin M. Murphy, 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," NBER Working Papers 3927, National Bureau of Economic Research, Inc.
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  7. Andreas Hornstein & Per Krussell & Giovanni L. Violante, 2004. "The effects of technical change on labor market inequalities," Working Paper 04-08, Federal Reserve Bank of Richmond.
  8. Margit Molnar & Przemyslaw Kowalski, 2008. "Economic impacts of the phase-out in 2005 of quantitative restrictions under the Agreement on textiles and Clothing," STUDIES IN TRADE AND INVESTMENT, in: Unveiling Protectionism: Regional Responses to Remaining Barriers in the Textiles and Clothing Trade, pages 49-83 pag United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
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  10. Gladys Lopez-Acevedo & Raymond Robertson, 2012. "Sewing Success? Employment, Wages, and Poverty following the End of the Multi-Fibre Arrangement," World Bank Publications, The World Bank, number 13137, February.
  11. Takahiro FUKUNISHI, 2009. "Has Low Productivity Constrained The Competitiveness Of African Firms? A Comparison Of Kenyan And Bangladeshi Garment Firms," The Developing Economies, Institute of Developing Economies, vol. 47(3), pages 307-339.
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Cited by:
  1. Kudo, Toshihiro, 2013. "Myanmar's apparel industry in the new international environment : prospects and challenges," IDE Discussion Papers 430, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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