Raymond Robertson

Exposure to foreign markets and plant-level innovation: evidence from Chile and Mexico

Unlike most studies that calculate productivity as a residual, this study uses detailed plant-level data to examine the relationship between exposure to foreign markets and specific innovations including product design, investment in new tools (such as computers), research and development, and innovation in products and processes. The results suggest that exposure to foreign markets is positively related to most types of technology. The effects seem to be stronger in recently liberalized Mexico, which may suggest that the innovation gains from liberalization are greatest in the early stages of liberalization.

Sewing success? : employment, wages, and poverty following the end of the multi-fibre arrangement

The global textile and apparel sector is critically important as an early phase in industrialization for many developing countries and as a provider of employment opportunities to thousands of low-income workers, many of them women. The goal of this book is to explore how the lifting of the Multi-fibre Arrangement/ Agreement on Textiles and Clothing (MFA/ATC) quotas has affected nine countries Bangladesh, Cambodia, Honduras, India, Mexico, Morocco, Pakistan, Sri Lanka, and Vietnam with the broader aim of better understanding the links between globalization and poverty in the developing world. Analyzing how employment, wage premiums, and the structure of the apparel industry have changed after the MFA/ATC can generate important lessons for policy makers for economic development and poverty reduction. This book uses in-depth country case studies as the broad methodological approach. In-depth country studies are important because countries are idiosyncratic: differences in regulatory context, history, location, trade relationships, and policies shape both the apparel sector and how the apparel sector changed after the end of the MFA. In-depth country studies place broader empirical work in context and strengthen the conclusions. The countries in this book were chosen because they represent the diversity of global apparel production, including differences across regions, income levels, trade relationships, and policies. The countries occupy different places in the global value chain that now characterizes apparel production. Not surprisingly, the countries studied in this book represent the diversity of post-MFA experiences. This book highlights four key findings: the first is that employment and export patterns after the MFA/ATC did not necessarily match predictions. This book shows that only about a third of the variation in cross-country changes in exports is explained by wage differences. While wage differences explain some of the production shifts, domestic policies targeting the apparel sector, ownership type, and functional upgrading of the industry also played an important role. Second, changes in exports are usually, but not always, good indicators of what happens to wages and employment. While rising apparel exports correlated with rising wages and employment in the large Asian countries, rising exports coincided with falling employment in Sri Lanka. Third, this book identifies the specific ways that changes in the global apparel market affected worker earnings, thus helping to explain impacts on poverty. Fourth, in terms of policies, the countries that had larger increases in apparel exports were those that promoted apparel sector upgrading; those that did not promote upgrading had smaller increases or even falling exports.

Trade and Wages: Two Puzzles from Mexico

Mexico plays an important role in the developing-country trade-liberalisation literature because it liberalised early and extensively. Numerous papers analysed changes in Mexican wage levels and inequality after Mexico joined the GATT in 1986. This paper reviews recent papers that analyse changes in wage levels and inequality since the North American Free Trade Agreement in 1994. Two main puzzles emerge. First, wage growth rates are similar before and after NAFTA. Second, Mexican wage inequality, which received much attention after its post-GATT rise, falls steadily after NAFTA. This paper reviews several possible explanations for these two phenomena.

Exchange Rates and Relative Wages: Evidence from Mexico."

Abstract Several recent studies find significant effects of real exchange rate movements on relative wages in developed countries. Few studies focus on developing countries. In Mexico, real rate movements are closely linked to monetary expansion paired with exchange market intervention. This paper finds significant positive correlation between real exchange rates and real wages in Mexico, with the relationship weaker in industries and regions that are more exposed to foreign competition. The effects also vary by education and gender.

Globalization, Wages, and the Quality of Jobs : Five Country Studies

The country studies in this volume analyze the link between globalization and working conditions in Cambodia, El Salvador, Honduras, Indonesia, and Madagascar. These countries vary significantly in population, economic circumstances, region, history, and institutions. All have experienced liberalization and globalization in the last 20 years. The heterogeneity of these countries provides the basis for a useful comparison of the effects of globalization on working conditions. As suggested in the framework, each country study has three main components: a description of the countrys experience with globalization, a qualitative part that analyzes country-specific aspects of working conditions, and an analysis of changes in interindustry wage differentials (IIWDs) that can be compared across countries. In general, globalization has been characterized by export-driven foreign direct investment (FDI) concentrated in relatively few sectors. Export-driven FDI in the apparel sector plays a prominent role in each country, although to varying degrees. In Cambodia, apparel made up 82 percent of all merchandise exports in 2003. Nearly two-thirds of that total was destined for the U.S. market. Virtually all factories in the Cambodian garment sector are foreign owned. Honduras rose from being the 34th largest supplier of apparel to the United states (U.S.) market in 1990 to fourth place in 2003. In 2003, two-thirds of all Honduran exports to the U.S. were garments and more than 82 percent of all Honduran workers worked in foreign-owned factories. A similar pattern emerges for El Salvador. For Madagascar, apparel exports from the Zone Franche were the primary force behind the countrys remarkable export growth and its transition from exporting primary products to exporting manufactured products between 1990 and 2005. By 2001, Madagascar had become the second most important clothing exporter in Sub-Saharan Africa as measured by total export value.

Labor adjustment costs in a destination country: the case of Mexico

Abstract Rodrik [Rodrik, D., 1997. Has Globalization Gone Too Far? Institute for International Economics, Washington, DC.] argues that firms use the threat of moving to low-cost (generally developing) markets to make employment more flexible at home. Although a large literature documents significant adjustment costs in developed countries, we know little about their size and importance in developing countries that receive capital. We employ monthly Mexican data from the GATT–NAFTA period to estimate adjustment costs in Mexico. We consider adjustment costs for production and non-production workers and allow for asymmetry. While patterns of adjustment costs are similar as in developed countries, adjustment costs in Mexico are generally an order of magnitude smaller.

Is Mexico a Lumpy Country

Mexicos experience before and after trade liberalization presents a challenge to neoclassical trade theory. Though labor abundant, it nevertheless exported skill-intensive goods and protected labor-intensive sectors prior to liberalization. Post-liberalization, the relative wage of skilled workers rose. Courant and Deardorff (1992) have shown theoretically that an extremely uneven distribution of factors within a country can induce behavior at odds with overall comparative advantage. We demonstrate the importance of this insight for developing countries. We show that Mexican regions exhibit substantial variation in skill abundance, offer significantly different relative factor rewards, and produce disjoint sets of industries. This heterogeneity helps to both undermine Mexicos aggregate labor abundance and motivate behavior that is more consistent with relative skill abundance.

What Happens to Wages after Displacement

Faced with limited resources, policymakers need to know when and where to target support for displaced workers. The academic literature offers little support, presenting wide-ranging results with no consistent explanation for the observed differences in wages after workers are displaced. In this paper, we demonstrate that the heterogeneity found in the literature is consistent with varying market conditions. The results suggest that support for displaced workers can be more efficiently allocated by considering the timing and location of displacement.

Public Disclosure, Reputation Sensitivity, and Labor Law Compliance: Evidence from Better Factories Cambodia

Public disclosure of labor conditions has been suggested as one way to encourage compliance with labor law and improvements in working conditions. Analyzing labor law compliance data in the apparel industry from Better Factories Cambodia, this paper finds that after the elimination of public disclosure of factory‐level noncompliance the rate of increase in compliance slowed, but did not return to the baseline, even in the absence of a reputation sensitive buyer.

Stitches to Riches? Apparel Employment, Trade, and Economic Development in South Asia

South Asia must create good-quality jobs for a rapidly expanding young population and bring more women into the labor force. The apparel sector in South Asia is labor intensive, employs more women on average than other manufacturing sectors, and provides jobs that allow for the acquisition of skills. Apparel already constitutes approximately 40 percent of manufacturing employment. And, given that much of apparel production continues to be labor intensive, the potential to create more and better jobs is immense. Despite these development benefits, the sector has not reached its full potential because of inefficiencies that affect its competitiveness. As a creator of jobs that are good for development and an illustration of the distortions that stifle productivity in light manufacturing in South Asia, this sector merits careful analysis. This report is aimed at better informing that debate by demystifying the global and South Asian apparel markets, estimating the potential gains in exports and jobs (including for women), and identifying policies that can unleash South Asia’s export and job potential. The main message of this report is that it is important for South Asian economies to address existing impediments and to facilitate growth in apparel to foster the creation of good jobs for development.