Discussion Paper 48: Labor Compliance Programs in Developing Countries and Trade Flows
Evidence from Better Work
Exporting apparel supports economic development by creating formal-sector employment opportunities for workers (especially women) whose best alternative domestic employment opportunities are informal work or agriculture. At the same time, apparel production is highly scrutinized due to concerns about poor working conditions.
The question of whether programs to improve working conditions are associated with more or less apparel exports remains a central concern to both current and potential apparel-exporting developing-country governments.
To evaluate this question, this study estimates the difference in exports following country-level initiation of the ILO-IFC’s Better Work program that currently operates in 10 apparel-exporting developing countries and has a well-established positive effect on working conditions in participating apparel-exporting factories.
Using a Poisson pseudo-maximum likelihood gravity model approach, this study compares apparel exports after entering the Better Work program against apparel exports from all other countries while controlling for importer, exporter, time, and country-pair fixed effects.
The results show that apparel exports are significantly higher following the initiation of the Better Work program relative to apparel-exporting countries that did not enter Better Work.