Reports
Discussion Papers
No.169 Competitiveness of the Knitwear Industry in Bangladesh: A Study of Industrial Development amid Global Competition
by Zaid Bakht, Md. Salimullah, Tatsufumi Yamagata , and Mohammad Yunus
October 2008
ABSTRACT
This paper assesses the technical efficiency and profitability of the knitwear industry in Bangladesh taking into account the sector’s role in poverty reduction. While stochastic frontier analysis was invoked to assess technical efficiency, three alternative measures, namely the rate of return, total factor productivity and the Solow residual, were used to gauge the extent and determinants of the profitability of the industry based on firm-level data collected in 2001. The estimation results indicate the high profitability of the knitwear firms. In Bangladesh, the dynamic development of the industry has entailed great diversity in efficiency in comparison with the garment industries of other developing countries. While there is a significant scale effect in profitability and productivity, no supporting evidence was found for the positive impact on competitiveness of industrial upgrading in terms of usage of expensive machinery and vertical integration and industrial agglomeration.
Keywords: Bangladesh, knitwear, poverty reduction, productivity, profitability, stochastic frontier
analysis
JEL classification: D24, J31, L67, O14, O53
Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.