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Political crisis and suspension of duty-free access in Madagascar : assessment of impacts on the garment industry

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  • Fukunishi, Takahiro

Abstract

The export-oriented garment industry in Madagascar has displayed robust growth, thus both contributing to the economy and creating formal employment opportunities. However, it experienced a critical situation after the political turmoil that occurred in 2009. Our investigation using the trade data demonstrates that suspension of duty-free access to the US market (AGOA) resulting from the turmoil had a greater impact on exports, 64%–78% reduction, than the turmoil itself. Our original factory-level data demonstrates that AGOA suspension increased the probability of closure by 57.8% for the factories supplying exclusively to US market, and reduced 6405 jobs for low-skilled positions during the post turmoil period. The factory-level adverse impacts are much less than those on export value at the industry level because of the maintained duty-free access to EU, which has provided an alternative market. It suggests that if EU also had cancelled duty-free access, adverse impacts would have been enormous. Given the general pattern of comparative advantage in low-income countries, unplanned cancellation of duty-free access for them hurts labor-intensive industries and low-skilled workers.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/1251/3/ARRIDE_Discussion_No.422_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 422.

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Date of creation: Jul 2013
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Publication status: Published in IDE Discussion Paper. No. 422. 2013.7
Handle: RePEc:jet:dpaper:dpaper422

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Related research

Keywords: Madagascar; Apparel industry; Exports; Politics; Employment; Manufacturing Exports; Garment Industry; Political Crisis; Duty-free Access;

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  1. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  2. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588.
  3. Shiferaw, Admasu, 2007. "Firm Heterogeneity and Market Selection in Sub-Saharan Africa: Does It Spur Industrial Progress?," Economic Development and Cultural Change, University of Chicago Press, vol. 55(2), pages 393-423, January.
  4. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
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