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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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    References listed on IDEAS

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    Cited by:

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    2. Tanaka, Kiyoyasu & Greaney, Theresa M., 2024. "Trade and employment in the formal and informal sectors: A natural experiment from Cambodia," Journal of Asian Economics, Elsevier, vol. 90(C).
    3. Kokas,Deeksha & Roche Rodriguez,Jaime Alfonso & Gladys Lopez-Acevedo & Robertson,Raymond & Wendy Karamba, 2024. "Dynamic Exports and Labor Markets for Inclusive Growth in Cambodia," Policy Research Working Paper Series 10895, The World Bank.
    4. Kokas, Deeksha & Roche Rodriguez, Jaime Alfonso & Lopez-Acevedo, Gladys & Robertson, Raymond & Karamba, Wendy, 2024. "Exports and Jobs for Inclusive Growth in Cambodia," IZA Discussion Papers 17209, IZA Network @ LISER.
    5. Kiyoyasu Tanaka, 2021. "The European Union's reform in rules of origin and international trade: Evidence from Cambodia," The World Economy, Wiley Blackwell, vol. 44(10), pages 3025-3050, October.
    6. 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.
    7. Souksavanh Vixathep & Nobuaki Matsunaga, 2012. "Firm Efficiency in Cambodia's Garment Industry on the Eve of the Multi-Fiber Arrangement Termination," Asian Economic Journal, East Asian Economic Association, vol. 26(4), pages 359-380, December.
    8. Arif Mostafa Khan & Meine Pieter van Dijk, 2024. "The role of multi‐stakeholder initiatives in advancing circularity and social sustainability in the textiles sector of Bangladesh," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(3), pages 1765-1788, April.
    9. 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).
    10. Raymond Robertson, 2022. "Pioneering a new approach to improving working conditions in developing countries: Better Factories Cambodia," Chapters, in: Handbook on Globalisation and Labour Standards, chapter 20, pages 359-381, Edward Elgar Publishing.
    11. Phon, Sophat, 2016. "The impacts of investment on climate change:the case study of Cambodia," MPRA Paper 88059, University Library of Munich, Germany, revised 2018.
    12. 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.
    13. 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).

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    Keywords

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    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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