IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/74146.html
   My bibliography  Save this paper

Economic Impact of Political Protests (Strikes) on Manufacturing Firms: Evidence from Bangladesh

Author

Listed:
  • Shonchoy, Abu
  • Tsubota, Kenmei

Abstract

Political protests in the form of strikes, locally known as hartals, remain quite common in the Indian subcontinent countries. Such a form of protests is associated with a mass movement, intended to cause a total shutdown of economic activities and often results in coercion, violence, and damage to public and private properties. Utilizing the World Bank enterprise survey data of 2007 and 2013 of Bangladesh, this study examines the impacts of hartal on manufacturing firms. We find that political protests significantly increase the cost for firms. Using flexible cost function based on factor analysis we see the factor-neutral effect of strikes is positive and statistically significant, showing evidence of reduction of firm productivity due to hartals. However, we did not find any evidence for systematic factor re-optimization by firms -- in response to political strikes – suggesting that firms do not reallocate factor shares to tackle uncertain and irregular shocks like hartal.

Suggested Citation

  • Shonchoy, Abu & Tsubota, Kenmei, 2016. "Economic Impact of Political Protests (Strikes) on Manufacturing Firms: Evidence from Bangladesh," MPRA Paper 74146, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:74146
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/74146/1/MPRA_paper_74146.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alexandre Mas, 2008. "Labour Unrest and the Quality of Production: Evidence from the Construction Equipment Resale Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(1), pages 229-258.
    2. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    3. Ari Aisen & Francisco Veiga, 2008. "Political instability and inflation volatility," Public Choice, Springer, vol. 135(3), pages 207-223, June.
    4. Svensson, Jakob, 1998. "Investment, property rights and political instability: Theory and evidence," European Economic Review, Elsevier, vol. 42(7), pages 1317-1341, July.
    5. Achyuta Adhvaryu & Namrata Kala & Anant Nyshadham, 2019. "Management and Shocks to Worker Productivity," NBER Working Papers 25865, National Bureau of Economic Research, Inc.
    6. Hunt Allcott & Allan Collard-Wexler & Stephen D. O'Connell, 2016. "How Do Electricity Shortages Affect Industry? Evidence from India," American Economic Review, American Economic Association, vol. 106(3), pages 587-624, March.
    7. Aisen, Ari & Veiga, Francisco José, 2013. "How does political instability affect economic growth?," European Journal of Political Economy, Elsevier, vol. 29(C), pages 151-167.
    8. Zahid Hussain & Nadeem Rizwan, 2014. "Bangladesh Development Update, October 2014," World Bank Publications - Reports 20669, The World Bank Group.
    9. Alan B. Krueger & Alexandre Mas, 2004. "Strikes, Scabs, and Tread Separations: Labor Strife and the Production of Defective Bridgestone/Firestone Tires," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 253-289, April.
    10. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    11. Harry C. Katz & Thomas A. Kochan & Kenneth R. Gobeille, 1983. "Industrial Relations Performance, Economic Performance, and QWL Programs: An Interplant Analysis," ILR Review, Cornell University, ILR School, vol. 37(1), pages 3-17, October.
    12. Christopher Ksoll & Rocco Macchiavello & Ameet Morjaria, 2009. "Guns and Roses: The Impact of the Kenyan Post-Election Violence on Flower Exporting Firms," CSAE Working Paper Series 2009-06, Centre for the Study of African Economies, University of Oxford.
    13. Fisher-Vanden, Karen & Jefferson, Gary H., 2008. "Technology diversity and development: Evidence from China's industrial enterprises," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 658-672, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ghosh, Saibal, 2023. "Social unrest and corporate behaviour during the Arab Spring period," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    2. Iqbal, Kazi & Tsubota, Kenmei & Shonchoy, Abu S & Hoque, Mainul, 2018. "Political instability and stock market returns : evidence from firm-level panel data of securities in Bangladesh," IDE Discussion Papers 712, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. Atindra Dahal, 2020. "Re-defining Modernity and Development Dimension in Quest of Indigenous and Ingenuous Prosperity of Himalayan Region," Technium Social Sciences Journal, Technium Science, vol. 3(1), pages 11-25, February.
    4. Samer Matta, 2017. "The Microeconomic Impact of Political Instability: Firm-Level Evidence from Tunisia," Working Papers 1135, Economic Research Forum, revised 09 Jul 2017.
    5. Samer Matta & Michael Bleaney & Simon Appleton, 2022. "The economic impact of political instability and mass civil protest," Economics and Politics, Wiley Blackwell, vol. 34(1), pages 253-270, March.
    6. Reshad N. Ahsan & Kazi Iqbal, 2020. "How does violence affect exporters? Evidence from political strikes in Bangladesh," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 599-625, August.
    7. Carolina Laureti & Alain De Janvry & Elisabeth Sadoulet, 2017. "Flexible Microfinance Products for Financial Management by the Poor: Evidence from SafeSave," Working Papers CEB 17-036, ULB -- Universite Libre de Bruxelles.
    8. Reshad N. Ahsan & Kazi Iqbal, 2016. "How Do Exporters Cope With Violence? Evidence from Political Strikes in Bangladesh," Department of Economics - Working Papers Series 2025, The University of Melbourne.
    9. Iqbal, Kazi & Tsubota, Kenmei & Shonchoy, Abu S & Hoque, Mainul, 2018. "Distributional impact of political violence : evidence from differential impacts on commodity price," IDE Discussion Papers 711, Institute of Developing Economies, Japan External Trade Organization(JETRO).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Samer Matta & Michael Bleaney & Simon Appleton, 2022. "The economic impact of political instability and mass civil protest," Economics and Politics, Wiley Blackwell, vol. 34(1), pages 253-270, March.
    2. Muhammad Zahid Naeem, 2020. "Political Instability, Trade Openness And Economic Growth In Pakistan: An Empirical Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 9(4), pages 183-190, December.
    3. Bo Sui & Chun-Ping Chang & Yin Chu, 2021. "Political Stability: an Impetus for Spatial Environmental Spillovers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 387-415, June.
    4. Imène Guetat, 2016. "Economic growth, government size and political instability," Post-Print hal-04097904, HAL.
    5. Büttner, Nicolas & Grimm, Michael & Soubeiga, Sidiki, 2022. "Political instability and households’ investment behavior: Evidence from Burkina Faso," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 350-368.
    6. Mohamed Maher & Yanzhi Zhao, 2022. "Do Political Instability and Military Expenditure Undermine Economic Growth in Egypt? Evidence from the ARDL Approach," Defence and Peace Economics, Taylor & Francis Journals, vol. 33(8), pages 956-979, November.
    7. Tang, Chor Foon & Abosedra, Salah, 2014. "The impacts of tourism, energy consumption and political instability on economic growth in the MENA countries," Energy Policy, Elsevier, vol. 68(C), pages 458-464.
    8. Rexford Abaidoo & Elvis Kwame Agyapong, 2022. "Commodity price volatility, inflation uncertainty and political stability," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 69(3), pages 351-381, September.
    9. Johannes Blum & Klaus Gründler, 2020. "Political Stability and Economic Prosperity: Are Coups Bad for Growth?," CESifo Working Paper Series 8317, CESifo.
    10. Ahmet Faruk AYSAN & Mustapha Kamel NABLI & Marie‐Ange VÉGANZONÈS‐VAROUDAKIS, 2007. "Governance Institutions And Private Investment: An Application To The Middle East And North Africa," The Developing Economies, Institute of Developing Economies, vol. 45(3), pages 339-377, September.
    11. Mr. Philip Barrett & Sophia Chen & Miss Mali Chivakul & Ms. Deniz O Igan, 2021. "Pricing Protest: The Response of Financial Markets to Social Unrest," IMF Working Papers 2021/079, International Monetary Fund.
    12. Chandan Sharma, 2021. "Does Corruption Sand The Wheels Of Financial Sector Development? Evidence From Global Panel Data," Journal of Financial Management, Markets and Institutions (JFMMI), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 1-32, December.
    13. Nurudeen Abu & Mohd Zaini Abd Karim & Mukhriz Izraf Azman Aziz, 2015. "Corruption, Political Instability and Economic Development in the Economic Community of West African States (ECOWAS): Is There a Causal Relationship?," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 9(1), March.
    14. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92, National Bureau of Economic Research, Inc.
    15. Abid, Mehdi, 2016. "Impact of economic, financial, and institutional factors on CO2 emissions: Evidence from Sub-Saharan Africa economies," Utilities Policy, Elsevier, vol. 41(C), pages 85-94.
    16. Art Durnev & Ruben Enikolopov & Maria Petrova & Veronica Santarosa, 2012. "Politics, instability, and international investment flows," Working Papers w0190, Center for Economic and Financial Research (CEFIR).
    17. Aisen, Ari & Veiga, Francisco José, 2013. "How does political instability affect economic growth?," European Journal of Political Economy, Elsevier, vol. 29(C), pages 151-167.
    18. Panos, Georgios & Theodossiou, Ioannis, 2009. "Union Mediation and Adaptation to Reciprocal Loyalty Arrangements," MPRA Paper 15471, University Library of Munich, Germany.
    19. Freund, Caroline & Jaud, Melise, 2013. "Regime Change, Democracy and Growth," CEPR Discussion Papers 9282, C.E.P.R. Discussion Papers.
    20. Fredriksson, Per G. & Svensson, Jakob, 2003. "Political instability, corruption and policy formation: the case of environmental policy," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1383-1405, August.

    More about this item

    Keywords

    Political strikes; translog cost function; factor biased technological change;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:74146. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.