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Competitiveness of the KnitwearIndustry in Bangladesh: A Study of Industrial Development amid GlobalCompetition

Abstract

This paper assesses the technicalefficiency and profitability of the knitwear industry in Bangladesh taking into account the sector's role in poverty reduction. While stochastic frontieranalysis was invoked to assess technical efficiency, three alternativemeasures, namely the rate of return, total factor productivity and the Solowresidual, were used to gauge the extent and determinants of the profitability of the industry based on firm-level data collected in 2001. The estimation resultsindicate the high profitability of the knitwear firms. In Bangladesh, the dynamic development of the industry has entailed great diversity in efficiencyin comparison with the garment industries of other developing countries. Whilethere is a significant scale effect in profitability and productivity, nosupporting evidence was found for the positive impact on competitiveness ofindustrial upgrading in terms of usage of expensive machinery and verticalintegration and industrial agglomeration.

Key words: Bangladesh, knitwear, povertyreduction, productivity, profitability, stochastic frontier analysis

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