IDEAS home Printed from https://ideas.repec.org/p/jet/dpaper/dpaper268.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    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
    Download Restriction: no
    ---><---

    Other versions of this item:

    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, vol. 55(2), pages 393-423, January.
    4. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    5. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    6. 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).
    7. Margit Molnar & Przemyslaw Kowalski, 2008. "Economic impacts of the phase-out in 2005 of quantitative restrictions under the Agreement on textiles and Clothing," STUDIES IN TRADE AND INVESTMENT, in: Escap (ed.), Unveiling Protectionism: Regional Responses to Remaining Barriers in the Textiles and Clothing Trade, pages 49-83 pag, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    8. 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.
    9. Chikako Oka, 2010. "Accounting for the Gaps in Labour Standard Compliance: The Role of Reputation-Conscious Buyers in the Cambodian Garment Industry," Post-Print hal-02952241, HAL.
    10. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
    11. Melanie Beresford, 2009. "The Cambodian clothing industry in the post-MFA environment: a review of developments," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 14(4), pages 366-388.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. 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.
    3. 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.
    4. Huynh, Phu., 2016. "Assessing the gender pay gap in Asia's garment sector," ILO Working Papers 994904713402676, International Labour Organization.
    5. 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).
    6. 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).
    7. 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.
    8. 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.
    9. 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.
    10. 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, Institute of Labor Economics (IZA).
    11. 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).
    12. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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).
    2. Raymond Robertson & Drusilla Brown & Rajeev Dehejia, 2021. "Working conditions and factory survival: Evidence from better factories Cambodia," Review of Development Economics, Wiley Blackwell, vol. 25(1), pages 228-254, February.
    3. Michael Palmer & Jenny Williams, 2020. "Are Employment Protection Laws for Disabled People Effective in a Developing Country?," Economics Discussion / Working Papers 20-22, The University of Western Australia, Department of Economics.
    4. Shiferaw, Admasu, 2009. "Survival of Private Sector Manufacturing Establishments in Africa: The Role of Productivity and Ownership," World Development, Elsevier, vol. 37(3), pages 572-584, March.
    5. Robertson, Raymond, 2019. "Working Conditions, Transparency, and Compliance in Global Value Chains: Evidence from Better Work Jordan," IZA Discussion Papers 12794, Institute of Labor Economics (IZA).
    6. Francisco Queiró, 2022. "Entrepreneurial Human Capital and Firm Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(4), pages 2061-2100.
    7. Philippe Aghion & Jing Cai & Mathias Dewatripont & Luosha Du & Ann Harrison & Patrick Legros, 2022. "Industrial Policy and Competition," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 15, pages 349-380, World Scientific Publishing Co. Pte. Ltd..
    8. Jaan Masso & Amaresh K Tiwari, 2021. "Productivity Implications Of R&D, Innovation And Capital Accumulation For Incumbents And Entrants: The Case Of Estonia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 130, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    9. Giordano, Claire & Lopez-Garcia, Paloma, 2019. "Firm heterogeneity and trade in EU countries: a cross-country analysis," Occasional Paper Series 225, European Central Bank.
    10. Mauro Caselli & Arpita Chatterjee & Shengyu Li, 2023. "Productivity and Quality of Multi-product Firms," Discussion Papers 2023-10, School of Economics, The University of New South Wales.
    11. Carol Newman & Gaia Narciso & Finn Tarp & Vu Xuan Nguyet Hong, 2009. "The Role of Technology, Investment and Ownership Structure in the Productivity Performance of the Manufacturing Sector in Vietnam," Trinity Economics Papers tep0109, Trinity College Dublin, Department of Economics.
    12. Anna Giunta & Domenico Scalera & Francesco Trivieri & Jeffrey B. Nugent & Mariarosaria Agostino, 2011. "Firm Productivity, Organizational Choice and Global Value Chain," Working Papers 2011R09, Orkestra - Basque Institute of Competitiveness.
    13. Baccini, Leonardo & Impullitti, Giammario & Malesky, Edmund J., 2019. "Globalization and state capitalism: Assessing Vietnam's accession to the WTO," Journal of International Economics, Elsevier, vol. 119(C), pages 75-92.
    14. Ann Harrison & John McLaren & Margaret S. McMillan, 2010. "Recent Findings on Trade and Inequality," NBER Working Papers 16425, National Bureau of Economic Research, Inc.
    15. HAMANO Masashige & OKUBO Toshihiro, 2021. "In Search of Lost Time: Firm Vintage and Macroeconomic Dynamics," Discussion papers 21015, Research Institute of Economy, Trade and Industry (RIETI).
    16. Bento, Pedro & Restuccia, Diego, 2021. "On average establishment size across sectors and countries," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 220-242.
    17. Chad Syverson, 2007. "Prices, Spatial Competition And Heterogeneous Producers: An Empirical Test," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 197-222, June.
    18. Marc J. Melitz & Sašo Polanec, 2015. "Dynamic Olley-Pakes productivity decomposition with entry and exit," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 362-375, June.
    19. Aragón, Fernando M. & Restuccia, Diego & Rud, Juan Pablo, 2022. "Are small farms really more productive than large farms?," Food Policy, Elsevier, vol. 106(C).
    20. Filippo Biondi & Sergio Inferrera & Matthias Mertens & Javier Miranda, 2023. "Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology," Jena Economics Research Papers 2023-011, Friedrich-Schiller-University Jena.

    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;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jet:dpaper:dpaper268. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michitaka Imamitsu (email available below). General contact details of provider: https://edirc.repec.org/data/idegvjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.