Demand-driven of Labour Law in Bangladesh

Authors
Laura Boudreau

Integration into global supply chains can substantially improve firms’ productivity and capabilities (e.g., output quality) and individuals’ labour-market opportunities and wellbeing in LICs. In many LICs that are undergoing rapid industrialization and integration into global supply chains, however, the state has limited capacity to pass and/or to enforce regulation. In weakly institutionalized environments, incentives provided by private sector actors – for example, large multinational firms – may be able to serve as a substitute for government enforcement.  However, there is little rigorous evidence about whether large multinational firms improve targeted firms’ compliance and whether they generate net benefits or costs to targeted firms and their workers. This project will make an important contribution to the nascent literature on this topic with causal evidence on the effects of a large-scale Corporate Social Responsibility (C.S.R.) intervention in Bangladesh’s apparel sector that aims to increase targeted establishments’ compliance with a local labour law.

The project uses a randomized controlled trial to study multinational retail and apparel firms’ C.S.R. intervention to increase their suppliers’ compliance with a Bangladeshi labour law. The specific labour law that they enforce strengthens workers’ empowerment related to safety and to health through the establishment of worker-manager safety committees. The author analyses the initiative’s effects on establishments’ compliance with the labour law, and in turn, its effects on establishments’ productivity. She also assesses the intervention impacts on workers’ welfare and job satisfaction.

This research will provide singular evidence on the effectiveness of multinational firms acting as standard-setters and monitors for local firms when the local government does not fulfil these roles. It will contribute to our understanding of the potential for large-scale C.S.R. to support sustainable economic growth of the private sector in weak states where formal institutions are lacking. If the Alliance’s intervention is successful, it will demonstrate the importance of linkages between local firms and multinational supply chains in order to foster more equitable growth in weak institutional environments. If the coalition’s intervention fails, it will demonstrate that even large-scale C.S.R. efforts by multinationals cannot change local conditions. In this case, the evidence would support the necessity of local formal institutions or alternative structures to set and to enforce labour standards.                               

Authors

Laura Boudreau

University of California, Berkeley