Reports
Discussion Papers
No.412 Slow and Steady Wins the Race: How the Garment Industry Leads Industrialization in Low-income Countries
by FUKUNISHI Takahiro and YAMAGATA Tatsufumi
April 2013
ABSTRACT
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.
Keywords:
Competitiveness,
Garment,
Race
to
the
bottom,
Bangladesh,
Cambodia,
Kenya,
Madagascar
JEL
classification:
D24,
F63,
L67,
O14,
O33,
O53,
O55
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.