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Slow and steady wins the race : how the garment industry leads industrialization in low-income countries

  • Fukunishi, Takahiro
  • Yamagata, Tatsufumi

This paper investigates how the garment industry escapes this vicious cycle and argues for the validity of labor-intensive industry as a starting point for full-fledged industrialization, even though it might at first seem to be a digression from the path to an innovation-led economy. By examining original firm-level data on garment-producing firms collected in 2002 and 2008 in Bangladesh, Cambodia, Kenya and Madagascar, the following conclusions are drawn: (1) low wages, though still sufficient for poverty reduction, are the main source of competitiveness in low-income countries; (2) after the successful initiation of industrialization causes wages to begin to rise, there is still a possibility for productivity enhancement; and (3) skill bias in technological progress is not yet a major factor, implying that the garment industry is still a labor-intensive industry. In sum, labor-intensive industry should not be discounted as a part of the development strategy of low-income countries.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/1264/1/ARRIDE_Discussion_No.412_fukunishi.pdf
File Function: First version, 2013
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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 412.

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Date of creation: Apr 2013
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Publication status: Published in IDE Discussion Paper. No. 412. 2013.4
Handle: RePEc:jet:dpaper:dpaper412
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  1. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
  2. Przemyslaw Kowalski & Margit Molnár, 2009. "Economic Impacts of the Phase-Out in 2005 of Quantitative Restrictions under the Agreement on Textiles and Clothing," OECD Trade Policy Papers 90, OECD Publishing.
  3. Hayami, Yujiro & Ruttan, Vernon W., 1969. "Factor Prices And Technical Change In Agricultural Development: The United States And Japan, 1880-1960," Staff Papers 14172, University of Minnesota, Department of Applied Economics.
  4. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2005. "The Effects of Technical Change on Labor Market Inequalities," Working Papers 89, Princeton University, Department of Economics, Center for Economic Policy Studies..
  5. Amjad (edited), Rashid, 1981. "The development labour intensive industry in ASEAN countries: an overview," MPRA Paper 38967, University Library of Munich, Germany.
  6. Gladys Lopez-Acevedo & Raymond Robertson, 2012. "Sewing Success? Employment, Wages, and Poverty following the End of the Multi-Fibre Arrangement," World Bank Publications, The World Bank, number 13137, March.
  7. Takahiro FUKUNISHI, 2009. "Has Low Productivity Constrained The Competitiveness Of African Firms? A Comparison Of Kenyan And Bangladeshi Garment Firms," The Developing Economies, Institute of Developing Economies, vol. 47(3), pages 307-339.
  8. Katz, L.F. & Murphy, K.M., 1991. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," Harvard Institute of Economic Research Working Papers 1580, Harvard - Institute of Economic Research.
  9. Deardorff, A.V., 1998. "Fragmentation in Simple Trade Models," Papers 98-11, Michigan - Center for Research on Economic & Social Theory.
  10. Gregory Clark, 2007. "Introduction to A Farewell to Alms: A Brief Economic History of the World
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  11. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
  12. 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).
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