Abstract

The role of export-oriented garment and textile industry on overall economic development is widely recognized. While some of the developing countries such as, China, Vietnam and Bangladesh have been highly successful in exporting highly labor intensive garment and textiles products, not all of the developing countries have been equally successful in exporting garment and textiles. The performance of developing countries in exporting these highly labor-intensive products is in fact, highly heterogeneous. Using cross-country panel data on the exports of garment and textiles by the developing countries, an attempt has been made in this paper to ascertain the importance of infrastructure and business environment in explaining the heterogeneous performance in exporting labor-intensive garment and textiles by the developing countries. The paper empirically demonstrates that besides labor, the availability of fixed capital, basic infrastructure and a business friendly environment significantly affect the export of labor-intensive garment and textiles by the developing countries. The paper, thus suggests to invest on infrastructure, and to develop a business friendly environment in developing countries to untie the growth potentials of labor-intensive exports, and economic growth.

Introduction

The last two decades of the twentieth century witnessed the emergence of a few rapidly growing developing countries mostly of which have been propelled by the export-oriented industries such as, garment and textiles that are highly labor intensive. For example, Bangladesh, Vietnam, China and India are some of the steadily growing developing countries in the world have been the major garment and textiles exporters (e.g., Gereffi, 1999; Joshi, 2002; Mottaleb and Sonobe, forthcoming, Yamagata, 2007). The availability of the cheap labor in the developing countries may provide a comparative advantage in exporting labor-intensive products as Hecksher-Ohlins factor endowment theory states. However, not all of the labor-abundant developing countries are equally successful in exporting labor-intensive products, and the performance varies greatly among the developing countries. The question arises as to what determines the success of the developing countries labor-intensive exports?

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Khondoker Abdul Mottaleb is Postdoctoral Research Fellow at National Graduate Institute for Policy Studies, Japan and K.P. Kalirajan is Professor in Crawford School of Economics and Government at The Australian National University, Canberra