Impacts of Trade and FDI on Productivity, Management, and Workplace Conditions: Evidence from Myanmar

By exploiting the rapid opening of Myanmar's market, the author examines the impact of the introduction to trade and FDI on productivity, management, and working conditions. 

Does trade and FDI liberalization promote sustainable economic growth in developing countries? Does this come at the expense of the safety of local workers? as many NGO activists claimed after the tragic factory accidents in Bangladesh and Pakistan? To date the evidence on these questions has been limited by the lack of causal evidence. While trade and multinational presence are strongly correlated with higher growth, productivity, wages and improved working conditions, the causal link is much less unclear. This project will exploit the rapid opening of Myanmar to trade and FDI as a natural experiment to address these questions. This provides an ideal setting to examine the impact of a rapid trade liberalization by comparing a heavily impacted industry (textile/garments) to a relatively untouched industry (food).

The aim of this project is therefore to assess the impact of export opening in Myanmar on firm performance (productivity, management, and workplace conditions) by collecting firm-level panel data. The researcher collected baseline data in 2013 from a sample of 400 firms in the garment and food processing sectors. This data showed that exporting plants are better managed and provide better working conditions in terms of safety and health. The researcher will use her PEDL grant to re-visit these firms in the summer of 2014; she will then compare the evolution of productivity, management and working conditions in the plants from the textile industry (a sector heavily impacted by trade and FDI) to that of those observed in the food-processing plants (a sector relatively untouched because of quality and local taste issues). 

Myanmar has just started getting access to the world markets through the lifting of both U.S. import sanctions and EU General System of Preference (GSP) sanctions in 2012 and 2013, alongside a change in Myanmar’s FDI law in 2012. This provides an ideal setting to examine the impact of a rapid trade liberalization by comparing a heavily impacted industry (textile/garments) to a relatively untouched industry (food).