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Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth, and wage profile under trade liberalization

Author

Listed:
  • Asuyama, Yoko
  • Chhun, Dalin
  • Fukunishi, Takahiro
  • Neou, Seiha
  • Yamagata, Tatsufumi

Abstract

The international garment trade was liberalized in 2005 following the termination of the MFA(Multifibre Arrangement) and ever since then, price competition has intensified. Employing a unique firm dataset collected by the authors, this paper examines the changes in the performance of Cambodian garment firms between 2002/03 and 2008/09. During the period concerned, frequent firm turnover led to an improvement of the industry’s productivity, and the study found that the average total-factor productivity (TFP) of new entrants was substantially higher than that of exiting firms. Furthermore, we observed that thanks to productivity growth, an improvement in workers’ welfare, including a rise in the relative wages of the low-skilled, was taking place. These industrial dynamics differ considerably from those indicated by the “race to the bottom” argument as applied to labor-intensive industrialization in low income countries.

Suggested Citation

  • Asuyama, Yoko & Chhun, Dalin & Fukunishi, Takahiro & Neou, Seiha & Yamagata, Tatsufumi, 2010. "Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth, and wage profile under trade liberalization," IDE Discussion Papers 268, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper268
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    File URL: https://ir.ide.go.jp/?action=repository_action_common_download&item_id=37904&item_no=1&attribute_id=22&file_no=1
    File Function: First version, 2010
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    References listed on IDEAS

    as
    1. Chikako Oka, 2010. "Accounting for the Gaps in Labour Standard Compliance: The Role of Reputation-Conscious Buyers in the Cambodian Garment Industry," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 22(1), pages 59-78, February.
    2. James Harrigan & Geoffrey Barrows, 2009. "Testing the Theory of Trade Policy: Evidence from the Abrupt End of the Multifiber Arrangement," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 282-294, May.
    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, pages 393-423.
    4. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, pages 1263-1297.
    5. 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).
    6. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557-557.
    7. R. Kaplinsky, 2000. "Globalisation and Unequalisation: What Can Be Learned from Value Chain Analysis?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(2), pages 117-146.
    8. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Muhammad Faisol Chowdhury & Tasnim Rezoana Tanim, 2016. "Industrial Accidents in Bangladesh Apparel Manufacturing Sector: An Analysis of the Two Most Deadliest Accidents In History," Asian Journal of Social Sciences and Management Studies, Asian Online Journal Publishing Group, vol. 3(2), pages 115-126.
    2. Huynh, Phu., 2016. "Assessing the gender pay gap in Asia's garment sector," ILO Working Papers 994904713402676, International Labour Organization.
    3. Fukunishi, Takahiro & Yamagata, Tatsufumi, 2013. "Slow and steady wins the race : how the garment industry leads industrialization in low-income countries," IDE Discussion Papers 412, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Souksavanh VIXATHEP & Nobuaki MATSUNAGA, 2015. "Entrepreneurial Human and Social Capital in Small Businesses in Vietnam - An Extended Analysis -," GSICS Working Paper Series 29, Graduate School of International Cooperation Studies, Kobe University.
    5. Goto, Kenta, 2012. "Is the Vietnamese garment industry at a turning point? : upgrading from the export to the domestic market," IDE Discussion Papers 373, Institute of Developing Economies, Japan External Trade Organization(JETRO).

    More about this item

    Keywords

    Cambodia; Firm turnover; Garments; Labor-intensive industrialization; Multifibre arrangement; Race to the bottom; Total factor productivity; Apparel industry; Productivity; Wages; Employment;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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