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Growth of Manufacturing Employment in the Changing Context of Trade and Trade-Related Policies

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Quest for Inclusive Growth in Bangladesh

Part of the book series: South Asia Economic and Policy Studies ((SAEP))

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Abstract

The growth of the manufacturing sector has been considered as one of the key policy tools for the structural transformation of the Bangladesh economy and as a major mean for achieving full employment. Following (Jenkins and Sen, Oxford Development Studies 34:299–322, 2006), this study has tried to distinguish the impact of trade on employment through three distinct effects—size, composition and process. The analysis tends to suggest that no single type of effect reveals any clear pattern of growth in manufacturing employment due to trade. At the same time, domestic-market-oriented industries have also been contributing to employment growth. In other words, trade-related policies and measures are likely to have a partial role in influencing the nexus of growth of production, exports and employment. However, the study shows that attempts to create exports at any cost or to overly protect domestic industries are likely to engender policy biases, rent-seeking and corruption. In the backdrop of different kinds of market failures and problems of governance, the choice of policies with regard to enhancing employment should be well-calibrated with policy priorities to increase productivity and export, with appropriate emphasis on both domestic- and export-oriented industries. In view of COVID-19, the above mentioned initiatives need to be customised and refocused.

This chapter draws from a working paper by the authors, Moazzem and Reza (2018), published by the CPD; content re-used with permission.

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Notes

  1. 1.

    According to Ali and Son (2007), full employment and productive employment are two primary factors that determine inclusive growth. Referring to the example of the Philippines, the paper indicates that a high level of structural transformation where workers shifted from low-productive to high-productive sectors, has contributed to economic growth and poverty reduction in the Philippines.

  2. 2.

    See among others, Muqtada (2010).

  3. 3.

    For a detailed evaluation of ISI during that period, see Little et al. (1970), Bruton (1970).

  4. 4.

    See for example, World Bank (1993), Khan (2007).

  5. 5.

    See Mazumdar (2008) for a general scrutiny of an unchallenging acceptance of the EOI strategy; Khan (2007) for a rise in policy biases in the trade regime of Bangladesh.

  6. 6.

    For details, see CPD (2010).

  7. 7.

    According to the study, in order to increase productivity, employment and economic growth, it is important to protect the workers’ rights rather than promote protectionist policies to protect jobs.

  8. 8.

    Lack of exposure to the export market is likely to happen due to limited capacity of these sub-sectors to participate in the export market.

  9. 9.

    HEIs—if the share of sales of a particular industry in the foreign market equals or exceeds 40% of total market sale in 2012; MEIs—if the share of sales of a particular industry in the foreign market equals or exceeds 10%, but is less than 40% of total market sale in 2012; LEIs—if the share of sales of a particular industry in the foreign market is less than 10% of total market sale in 2012.

  10. 10.

    The ECI portraits the degree of concentration of a country’s export in a small number of products or a small region. The perfect concentrated index must hold the value of 1, implying the country is concentrated only on a single product.

  11. 11.

    The sectoral HHI is defined as the square root of the sum of the squared shares of exports of each industry in total exports; takes a value between 0 and 1. Higher values indicate that exports are concentrated in fewer sectors.

  12. 12.

    The RMG industry is accounted for about 55% of total manufacturing employment, followed by textiles (16.1%), non-metallic products (8.9%) and beverages (5.6%).

  13. 13.

    One must note the caveat that size in the above analysis refers to the percentage share in value-added, and not to the size of enterprises.

  14. 14.

    We have considered the 70th (equal or more than that) percentile of capital–labour ratio for manufacturing industries as capital-intensive, and below that considered as labour-intensive. And the given result is more congruent to the common scenario. Capital-intensive industries—if the value of capital–labour ratio of a particular industry is equal to or exceeds 400. Labour-intensive industries—if the value of capital–labour ratio of a particular industry is less than 400.

  15. 15.

    Employment elasticity is defined here as percentage change in manufacturing employment over percentage change in manufacturing GDP over a period.

  16. 16.

    Islam (2001) showed that employment elasticity in manufacturing declined from 0.76 during 1981–1985 to 0.66 during 1986–1992 while using ILO-EMP/RECON database on employment; on the other hand, Islam (2004) calculated employment elasticity of the manufacturing sector as 0.39 based on the regression result in respect with poverty incidence and annual GDP growth.

  17. 17.

    The data having zero (0) figures and blanks in all export and import dataset have been replaced by 0.01 value. The justification for this kind of minor addition is that it would provide a better dataset without having any mathematical errors. On the other hand, the data having zero (0) figures in tariff data set has also been replaced by 0.01 value, and leaving all the blanks unchanged.

  18. 18.

    See details on The Business Standard (2020).

  19. 19.

    Note that non-traded sector plays a significant role in employment generation.

  20. 20.

    See Ahmed (2015), Khan (2007).

  21. 21.

    Private investment is still relatively low.

  22. 22.

    Mazumdar (2008).

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Author information

Authors and Affiliations

  1. Centre for Policy Dialogue (CPD), Dhaka, Bangladesh

    Khondaker Golam Moazzem

  2. International Initiative for Impact Evaluation (3ie), New Delhi, India

    Md. Minhaz M. Reza

  3. CPD-RMG Project, Centre for Policy Dialogue (CPD), Dhaka, Bangladesh

    Md. Minhaz M. Reza

Authors
  1. Khondaker Golam Moazzem
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  2. Md. Minhaz M. Reza
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Correspondence to Khondaker Golam Moazzem .

Editor information

Editors and Affiliations

  1. Consultant Economist and Visiting Fellow, Centre for Policy Dialogue (CPD), Dhaka, Bangladesh

    Muhammed Muqtada

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Moazzem, K.G., Reza, M.M. (2020). Growth of Manufacturing Employment in the Changing Context of Trade and Trade-Related Policies. In: Muqtada, M. (eds) Quest for Inclusive Growth in Bangladesh . South Asia Economic and Policy Studies. Springer, Singapore. https://doi.org/10.1007/978-981-15-7614-0_5

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  • DOI: https://doi.org/10.1007/978-981-15-7614-0_5

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