Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth, and wage profile under trade liberalization
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 industryâ€™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 workersâ€™ 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 â€œrace to the bottomâ€ argument as applied to labor-intensive industrialization in low income countries.
|Date of creation:||Dec 2010|
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|Publication status:||Published in IDE Discussion Paper. No. 268. 2010.12|
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