Effect of Export Growth in Ready-made Garments and a Schooling Subsidy on Women in Bangladesh

Paper Submitted

Heath, Rachel and Mushfiq Mobarak (2011). “Supply and Demand Constraints on Educational Investment: Evidence from Garment Sector Jobs and the Female Stipend Program in Bangladesh.”

Project Summary

Bangladeshi society is characterized by conservative gender norms, but recent industrial development has created economic opportunities for women. In collaboration with Rachel Heath (Yale economics PhD candidate), this project examines the role of two developments in particular: the rapid expansion of the ready-made garments export industry and a subsidy of secondary schooling for girls. The research survey examines 1400 households in the outskirts of Dhaka, collecting detailed work and schooling histories and measuring female autonomy and marriage and fertility outcomes. Some of the garment workers in the sample work in the export processing zone, which also allows the researchers to examine whether government spending aimed to entice companies into an Export Processing Zone translates into better wages and conditions for its citizens.

The first aspect of the project focuses on the short-run effects of a holding a job and being able to control resources within the household, as well as the long-run impacts of a job in the garment industry on the woman’s timing of marriage, choice of partner, fertility timing, and number of children. The second element seeks to understand the trend of garment factories to hire new employees through referrals from current workers—whether it be to economize on search costs or to identify and hire better workers. The research looks at detailed work histories to asses the job performance of employees hired through different methods, as well as information on referrers and referees, in order to identify whether workers in the same family network have similar skills or motivation and whether firms prefer to assign workers of the same family network to work in close contact with one another. Understanding why referrals are beneficial to the employer is important for designing policies that ensure that the relatively well-paying garment jobs are fairly accessible Description: image002 to all qualified workers, as opposed to being concentrated in certain privileged social networks.

Bangladesh has subsidized female secondary school enrollment since the early 1990s. Educational attainment among females has increased rapidly as a result (from 22 percent in 1986 to 42 percent in 2007 according to UNICEF, and the rate now surpasses male education). A collaborative project with Toan Do (World Bank) seeks to understand the medium and long-term consequences of this shift on female labor force participation, and marriage and fertility outcomes. Since the program was gradually phased-in over the area studied, the outcomes for a girl of school-age just before the program began can be compared to her younger sister (or to another girl in the same village) in school just after program implementation, in order to isolate the effect of the schooling subsidy from other coincident social and economic changes. Since girls only receive the stipend if they remain unmarried, analysis will begin by testing whether the program indeed increased age at marriage and decreased fertility. The project will then explore subsequent the girls’ marriages, including the quality of the match, the husband’s characteristics, and dowry payments. This research can both address the economic theory that predicts that in general equilibrium, a large-scale intervention benefiting all females may not affect match quality at all, as well as explore the important policy question about the returns to education in the garment industry and other sectors.

Paper Abstracts:

Heath, Rachel and Mushfiq Mobarak (2011). “Supply and Demand Constraints on Educational Investment: Evidence from Garment Sector Jobs and the Female Stipend Program in Bangladesh.”

Abstract: While increasing school enrollment is a major goal of development policy, little is known about the relative effectiveness of supply-side interventions that lower the cost of schooling relative to demand-side interventions that make existing schooling more appealing. We examine the effects of a roughly simultaneous supply-side influence (the Female Stipend Program) and a major demand-side influence (the expansion of the garment industry) on girls schooling in Bangladesh in the 1980’s and 1990’s. The garment sector could increase girls schooling by providing jobs which require education or from income effects of parents working in the sector. To identify effects of the garment sector on girls’ schooling, we look for changes in girls’ enrollment (relative to boys) in garment villages (relative to non-garment villages) when there are increases in the number of garment jobs available. We find that the arrival of garment jobs increases schooling for younger girls: a ten percent increase in garment jobs corresponds to an 1.35 percentage point percent increase in the probability that a 5-year-old girl is in school. There is a zero average effect for older girls, some of whom likely drop out of school to take the jobs right away. We identify effects of the FSP with a regression discontinuity and do not find a statistically significant effect of the program.