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Labour Cost and Export Behaviour of Firms in Indian Textile and Clothing Industry

Author

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  • Abraham, Vinoj
  • Sasikumar, S.K.

Abstract

The implementation of the Agreement on Textile and Clothing (ATC) of the World Trade Organization (WTO) renders both threats and opportunities to India’s Textile and Clothing (T&C) industry in the wake of liberal international trade in the sector. Firms acquire greater international competitiveness through various cost cutting and efficiency enhancing strategies. The question we try to ponder on is, what route does Indian firms take to join the international export market in T&C. Empirical analysis, using Tobit estimation techniques, supported the view that increasing the share of low cost labour was an important route through which export performance of the Indian firms in T&C was enhanced. Further, the use of this means to perform better in the international market aggravated in the period after the implementation of the ATC. On the other hand, capital and technology based factors did not have any perceptive effect on the export performance of Indian firms in the international market. This endorses the view that the Indian T&C firms by and large utilized the low road to competitiveness, rather than the other. Also the importance of the import intensity in export performance suggests that Indian T&C is increasingly getting integrated within the global value chain.

Suggested Citation

  • Abraham, Vinoj & Sasikumar, S.K., 2010. "Labour Cost and Export Behaviour of Firms in Indian Textile and Clothing Industry," MPRA Paper 22784, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22784
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    File URL: https://mpra.ub.uni-muenchen.de/22784/1/MPRA_paper_22784.pdf
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    References listed on IDEAS

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    1. Montobbio, Fabio & Rampa, Francesco, 2005. "The impact of technology and structural change on export performance in nine developing countries," World Development, Elsevier, vol. 33(4), pages 527-547, April.
    2. Nordås, Hildegunn Kyvik, 2004. "The global textile and clothing industry post the agreement on textiles and clothing," WTO Discussion Papers 5, World Trade Organization (WTO), Economic Research and Statistics Division.
    3. Dijk, van M., 2001. "The Determinants of Export Performance in Developing Countries: The Case of Indonesian Manufacturing," Working Papers 02.01, Eindhoven Center for Innovation Studies.
    4. Diao, Xinshen & Somwaru, Agapi, 2001. "Impact of the MFA phase-out on the world economy," TMD discussion papers 79, International Food Policy Research Institute (IFPRI).
    5. Eric Ramstetter, 1999. "Trade Propensities and Foreign Ownership Shares in Indonesian Manufacturing," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 35(2), pages 43-66.
    6. Brouwer, Erik & Kleinknecht, Alfred & Reijnen, Jeroen O N, 1993. "Employment Growth and Innovation at the Firm Level," Journal of Evolutionary Economics, Springer, vol. 3(2), pages 153-159, May.
    7. Wakelin, Katharine, 1998. "Innovation and export behaviour at the firm level," Research Policy, Elsevier, vol. 26(7-8), pages 829-841, April.
    8. Manoj Pant, 1993. "Export performance, Transnational Corporations and the Manufacturing Sector: A Case Study of India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 28(1), pages 41-54, January.
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    Cited by:

    1. Shabbir, Safia & Iqbal, Javed & Hameed, Saima, 2013. "Risk Premium, Interest Rate Differential, and Subsidized Lending in Pakistan," MPRA Paper 48250, University Library of Munich, Germany.

    More about this item

    Keywords

    Export performance; Textile and clothing industry; Labour cost; Tobit Model; Agreement on Textile and Clothing;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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