Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216353 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13041
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper studies how a positive export shock - the sharp increase in garment-sector exports that began at the end of the Multifibre Arrangement (MFA) - spread through Bangladesh's labor markets. Although the end of the MFA was arguably exogenous to Bangladesh, we instrument export demand with OECD imports to ensure identification. We compare estimates of the local labor market effects (wages and informality) and estimates from wage equations that reflect the predictions from long-run, general-equilibrium neoclassical trade theory. As in other studies, we find that the export shock was localized both in terms of sector and geography. Wages increased and informality decreased in sub-districts more exposed to the export shock. Unlike in other studies, these local labor market effects dissipate quickly. Furthermore, Bangladesh's export shock was sector specific, limited predominantly to the female-intensive garment and textile sector. We show that, following the increase in exports of the female-intensive good, the male-female wage gap closes considerably throughout the country – not just in the apparel sector. In relatively small Bangladesh, the national labor market seems to be more integrated compared to larger countries studied, possibly suggesting that labor adjustment costs are lower in smaller countries.
Subjects: 
local labor markets
Bangladesh
apparel
exports
wage inequality
Stolper-Samuelson
JEL: 
F13
F14
F15
F16
J23
J31
O15
O19
Document Type: 
Working Paper

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