Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth, and wage profile under trade liberalization

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.

Commercialization of agriculture in the Himalayas

Increased market integration and commercialization of traditional agriculture in the Himalayas is part of a development strategy towards growth and better standard of living. More than 97 percent households depend upon agricultural and allied activities for livelihood which constitutes 30 percent of the household income. Given the importance of commercialization of agriculture to improve the productivity, per capita income and thereby the standard of living in the Himalayas, we examine the factors affecting the commercialization of agriculture on the basis of primary survey data. The results reveal that the land size, gender of the household head, livestock assets, ethnicity, education and location are important determinants of commercialization. Although commercialization of agriculture is considered as stimulated private-sector activity, public policy is essential to facilitate driving forces viz., trade and market reforms, rural infrastructure, and the institutional framework for legal and contractual arrangements between farmers and processors.

Ex ante bargaining and ex post enforcement in trade credit supply: theory and evidence from China

If payment of goods is easily default, economic transaction may deeply suffer from the risk. This risky environment formed a mechanism that governs how economic transaction is realized, subsequently how trade credit is given. This paper distinguished ex ante bargaining and ex post enforcement, then modeled that bargaining power reduces trade credit ex ante, and ex post enforcement power and cash in hand of buyer can enhances both trade amount and trade credit in a presence of default risk. We modeled this relationship in order to organize findings from previous literature and from our original micro data on detailed transaction in China to consistently understand the mechanism governing trade credit. Then empirically tested a structure from the theoretical prediction with data. Results show that ex post enforcement power of seller mainly determines size of trade credit and trade amount, cash in hand of buyer can substitute with enforcement power; Bargaining power of seller is exercised to reduces trade credit and trade amount for avoiding default risk, but it simultaneously improves enforcement power as well. We found that ex post enforcement power consists of (ex ante) bargaining power on between two parties and intervention from the third party. However, its magnitude is far smaller than the direct impact to reduce trade credit and trade amount.

Chapter 5 Product Differentiation versus Geographical Differentiation: Evidence from the Pork Processing Industry in China

This chapter attempts to identify whether product differentiation or geographical differentiation is the main source of profit for firms in developing economies by employing a simple idea from the recently developed method of empirical industrial organization. Theoretically, location choice and product choice have been considered as analogues in differentiation, but in the real world, which of these strategies is chosen will result in an immense difference in firm behavior and in the development process of the industry. Development of the technique of empirical industrial organization enabled us to identify market outcomes with endogeneity. A typical case is the market outcome with differentiation, where price or product choice is endogenously determined. Our original survey contains data on market location, differences in product types, and price. The results show that product differentiation rather than geographical differentiation mitigates pressure on price competition, but 70 per cent secures geographical monopoly.

Knowledge spillover in Indian automobile industry : the process and the coverage

In India, as the production of passenger cars increased, many local small and medium enterprises (SMEs) entered the parts and components manufacturing sector. The sources of knowledge for large enterprises and SMEs are different. Naturally, spillover effects among large enterprises and between large enterprises and SMEs are different. This paper focuses on knowledge spillover among large enterprises and from large enterprises to SMEs. Subcontractor can absorb relation-specific skills through repeated interaction with parent company. The results of field survey emphasizes that relation-specific skills are a determinant factor of spillover effects from assemblers and large auto component manufacturers to SMEs. Econometric analysis shows that spillover effects among medium and large automobile units and from medium and large automobile units to small units went beyond boundary of cluster.

Foctors that prevent children from gaining access to schooling : a study of Delhi Slum households

This paper examines the factors that prevent slum children aged 5 to 14 from gaining access to schooling in light of the worsening urban poverty and sizable increase in rural-to-urban migration. Bias against social disadvantage in terms of gender and caste is not clearly manifested in schooling, while migrated children are less likely to attend school. I argue that the lack of preparation for schooling in the pre-schooling ages and school admission procedures are the main obstacles for migrated children. The most important implication for universal elementary education in urban India is raising parental awareness and simplifying the admission procedures.

Effects of birth order and sibling sex composition on human capital investment in children in India

The paper explores the effects of birth order and sibling sex composition on human capital investment in children in India using the Indian Human Development Survey (IHDS). Endogeneity of fertility is addressed using instruments and controlling for household fixed effects. Family size effect is also distinguished from the sibling sex composition effect. Previous literature has often failed to take endogeneity into account and shows a negative birth order effect for girls in India. Once endogeneity of fertility is addressed, there is no evidence for a negative birth order effect or sibling sex composition effect for girls. Results show that boys are worse off in households that have a higher proportion of boys specifically when they have older brothers.

Restructuring the state budget system for disinflation and exchange rate unification in Myanmar

The installment of a new government has augmented the prospect for implementing disinflation and exchange rate unification in Myanmar. A close look at the state budget shows that the reform of the budget system for state economic enterprises (SEEs) is essential. Reforms need to hold the replacement of controlled prices including the official exchange rate with market prices in SEE operations, and the separation of the SEEs from the state budget. But separating the SEEs from the state budget will necessitate careful planning to cope with SEE bankruptcies which would imposes another fiscal burden on the government. Therefore, economic viability must be a criterion for the continuation of their operations.

Innovating global value chains : creation of the netbook market by Taiwanese firms

This paper explores the process of creation of the netbook market by Taiwanese firms as an example of a disruptive innovation by latecomer firms. As an analytical framework, I employ the global value chain perspective to capture the dynamics of vertical inter-firm relationships that drive some firms in the chain to change the status quo of the industry. I then divide the process of the emergence of the netbook market into three consecutive stages, i.e. (1) the launch of the first-generation netbook by a Taiwanese firm named ASUSTeK, (2) the response of the two powerful platform leaders of the industry, Intel and Microsoft Intel, to ASUSTeK’s innovation, and (3) the market entry by another powerful Taiwanese firm, Acer, and explain how Taiwanese firms broke the Intel-centric market and tapped into the market-creating innovation opportunities that had been suppressed by the two powerful platform leaders. I also show that the creation of the netbook industry was an evolutionary process in which a series of responses by different industry players led to changes in the status quo of the industry.

Does the use of multiple FTAs force firms to raise local input share? : evidence of the spaghetti bowl phenomenon

This paper empirically investigates the firm-level relationship between the local input share and the number of used FTAs by employing the data on FTA utilization in Japanese affiliates in ASEAN. As a result, we do not find a robust linear relationship. However, affiliates using a large number of FTAs (seven or eight) have an extremely higher share of local inputs. This result might be interpreted as the first evidence of the “spaghetti bowl phenomenon”.

Firms' use of FTA schemes in exporting and importing : is there a two-way relationship?

In this paper, we examine the roles of firm size in the use of FTA schemes in exporting and importing. Also, it is investigated as to whether FTA users in importing (exporting) are more likely to use FTA schemes in exporting (importing). To do that, we employed a unique survey in which the detailed information on FTA use is available for Japanese affiliates in ASEAN. Our findings are summarized as follows. First, firm size matters in the use of FTA schemes only in exporting, not in importing. Second, the past experience of FTA use in exporting (importing) does not help firms use the FTA schemes in importing (exporting). Thus, it is necessary to assist firms to use FTA schemes in exporting even if they are already using FTA schemes in importing.

Impacts of FTA utilization on firm performance

The international export and investment activities of firms have been widely studied by scholars. In particular, prior studies have focused on two main hypotheses about firms engaged in international activities such as exporting and investing abroad; namely, self-selection of more productive firms into international activities and learning-by-doing international activities. This paper is the first study that explores these hypotheses in regard to firms’ use of free trade agreements (FTAs). We first estimate the propensity score for firms’ use of FTA schemes, and find that larger firms are more likely to participate. Then, by conducting matching analysis using the propensity scores, we find that the use of FTA schemes does not change employment in firms, but does result in more local inputs used and increased exports.

What motivates female operators to enter the garment industry in Pakistan in the post-MFA period?

Pakistan's knitwear exports had been struggling since the quota phase-out until 2009. A particular feature of Pakistan's garment industry is that hiring more male sewing operators at piece rates. Recently, a few surviving knitwear factories have adopted a strategy of shifting from male piece-rate operators to salaried female operators. In Pakistan, female participation in general workforce is very limited and hiring salaried female operators requires management effort and expertise. However, even in the factories with such management skills, household factors prevent females from working outside because Pakistani culture disrespects women working in factories. Our survey reveals that financial motives compel female household members to work outside their homes and that female operators contribute substantially to their households' finances.

Myanmar's two decades of partial transition to a market economy : a negative legacy for the new government

Despite more than two decades of transition from a centrally planned to a market-oriented economy, Myanmar’s economic transition is still only partly complete. The government’s initial strategy for dealing with the swelling deficits of the state economic enterprises (SEEs) was to put them under direct control in order to scrutinize their expenditures. This policy change postponed restructuring and exacerbated the soft budget constraint problem of the SEEs. While the installation of a new government in March 2011 has increased prospects for economic development, sustainable growth still requires full-scale structural reform of the SEEs and institutional infrastructure building. Myanmar can learn from the gradual approaches to economic transition in China and Vietnam, where partial reforms weakened further impetus for reforms.

Research review : searching for a new framework for Thailand's foreign policy in the post-cold war era

Thai foreign policy in the 1990s has been said to be contingent on the government in power, which changes between (or within) these groups and vacillates between pro-democratic reformists/principle-pursuers and the conservatives/profit-seekers. In these studies, Thailand’s Indochinese policy has often been referred to as a typical consequence of politics between the pragmatists and the reformists. However, whether or not domestic oppositional politics is the key determinant of foreign policy in the post-Cold War era still requires further examination, precisely because the model is now facing serious challenges between theory and reality. In this paper, I review the existing arguments concerning Thailand’s foreign policy in the post-Cold War Era and point out their limitations and questions for future study.