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LABOR COST AND EXPORT BEHAVIOR OF FIRMS IN INDIAN TEXTILE AND CLOTHING INDUSTRY

LABOR COST AND EXPORT BEHAVIOR OF FIRMS IN INDIAN TEXTILE AND CLOTHING INDUSTRY The implementation of the Agreement on Textile and Clothing (ATC) of the World Trade Organization (WTO) renders both threats and opportunities to India’s Textile and Clothing (T&C) industry in the wake of liberal international trade in the sector. Firms acquire greater international competitiveness through various cost cutting and efficiency enhancing strategies. The question we try to ponder on is what route does Indian firms take to join the international export market in T&C. Empirical analysis, using Tobit estimation techniques, supported the view that increasing the share of low cost labor was an important route through which export performance of the Indian firms in T&C was enhanced. Further, the use of this means to perform better in the international market aggravated in the period after the implementation of the ATC. On the other hand, capital and technology based factors did not have any perceptive effect on the export performance of Indian firms in the international market. This endorses the view that the Indian T&C firms by and large utilized the low road to competitiveness, rather than the other. Also the importance of the import intensity in export performance suggests that Indian T&C is increasingly getting integrated within the global value chain. JEL: F14, F16, J3 Keywords: export performance, textile and clothing industry, labor cost, Tobit Model, agreement on textile and clothing http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics, Management, and Financial Markets Addleton Academic Publishers

LABOR COST AND EXPORT BEHAVIOR OF FIRMS IN INDIAN TEXTILE AND CLOTHING INDUSTRY

Economics, Management, and Financial Markets , Volume 6 (1): 258-282 – Jan 1, 2011

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Publisher
Addleton Academic Publishers
Copyright
© 2009 Addleton Academic Publishers
ISSN
1842-3191
eISSN
1938-212X
Publisher site
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Abstract

The implementation of the Agreement on Textile and Clothing (ATC) of the World Trade Organization (WTO) renders both threats and opportunities to India’s Textile and Clothing (T&C) industry in the wake of liberal international trade in the sector. Firms acquire greater international competitiveness through various cost cutting and efficiency enhancing strategies. The question we try to ponder on is what route does Indian firms take to join the international export market in T&C. Empirical analysis, using Tobit estimation techniques, supported the view that increasing the share of low cost labor was an important route through which export performance of the Indian firms in T&C was enhanced. Further, the use of this means to perform better in the international market aggravated in the period after the implementation of the ATC. On the other hand, capital and technology based factors did not have any perceptive effect on the export performance of Indian firms in the international market. This endorses the view that the Indian T&C firms by and large utilized the low road to competitiveness, rather than the other. Also the importance of the import intensity in export performance suggests that Indian T&C is increasingly getting integrated within the global value chain. JEL: F14, F16, J3 Keywords: export performance, textile and clothing industry, labor cost, Tobit Model, agreement on textile and clothing

Journal

Economics, Management, and Financial MarketsAddleton Academic Publishers

Published: Jan 1, 2011

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