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Performance and dynamics of African firms : a comparative analysis of garment firms in Kenya and Bangladesh

Author: Fukunishi, T

Awarding University: University of London, England

Level : PhD

Year: 2013

Holding Libraries: Institute of Commonwealth Studies, England ;

Subject Terms: Labour ; Exports ; Clothing industry ; Labour economics ; Bangladesh ;

Abstract:

This thesis attempts to understand the causes behind the stagnation of the African manufacturing sector based on comparative case studies. We specifically compare the garment industries in Kenya and Bangladesh, which have similar endowments including income per capita and business environment, but contrast in the development of the typical labour-intensive industry. Our comparison between countries with similar endowments simplifies the causes of the divergent performance, since it effectively controls possible reverse causation. Additionally, the focus on a labour-intensive industry demonstrates obstacles at the early stage of industrialisation. The fact that the Kenyan industry had growth opportunity in the period of analysis, from 2002 to 2008, makes the comparison meaningful. Using firm data and in-depth interviews, the comparison is based on a microeconomic perspective so that it incorporates firm heterogeneity. The main analysis is extended in three chapters. Sources of the competitiveness gap between the two industries are explored in Chapter 4. Chapter 5 demonstrates the dynamics of non-exporters in Kenya, while the dynamics in the export market, namely export participation, are analysed in Chapter 6. We found that the most influential source of the competitiveness gap is labour cost rather than productivity; the wages in Kenya are far higher than those in Bangladesh. Due to the large cost gap, the Kenyan garment industry experienced a drastic contraction in the liberalized local and export markets. Consequently, Kenyan local firms specialised in the local uniform growth and discouraging participation to the export market. High labour costs relative to income per capita can be an important cause of the stagnation of the manufacturing sector in some other African countries where the labour cost is as high as it is in Kenya.