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

Takahiro Fukunishi and Tatsufumi Yamagata

No 412, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

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: Developing countries; Bangladesh; Cambodia; Kenya; Madagascar; Apparel industry; Textile industry; Industrialization; International competition; Competitiveness; Garment; Race to the bottom (search for similar items in EconPapers)
JEL-codes: D24 F63 L67 O14 O33 O53 O55 (search for similar items in EconPapers)
Date: 2013-04-01
New Economics Papers: this item is included in nep-cwa
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Citations: View citations in EconPapers (1)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 412. 2013-04-01

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