| Peer-Reviewed

Garment Sector Development Nexus Economic Growth in Bangladesh: A Dynamic Cointegration and Causality Analysis

Received: 21 November 2021     Accepted: 7 December 2021     Published: 24 December 2021
Views:       Downloads:
Abstract

In Bangladesh the garment sector is one of the major industrial sector which occupied its foremost presence in the economy of the country in terms of foreign exchange earnings, contribution to GDP, and employment generation and as well. The garment sector plays significant roles for socio-economic development and poverty alleviation in Bangladesh. The export-oriented readymade garments (RMG) sector in Bangladesh, started its journey in late 1970s as a small non-traditional sector of export. The industry began its journey from 1978 and formally started its journey in the 1980s, after that RMG sector of Bangladesh started growing, capture the market globally and providing valuable performance. In 1979 the garment sector exported only 0.672 million $ with operating 12 garment factories by 0.39 million workers but in 2020 within a span of two decays export values have gone up to 31456.73 million USD with its 4764 export oriented garment industries including 4.23 million workers. Thus an important question is usually raised by the researchers, is there a long-run cointegration relationship between garment sector development and economic growth in Bangladesh? To give the answer of this question this paper has tried to find out whether the long-run cointegration relationship exists between garment sector development and economic growth in Bangladesh economy. The study is used the times series data from 1976-2020 for garment sector development and economic growth. The existence of long-run cointegration relationship is found between garment sector development and economic growth in Bangladesh economy. From the estimated results of the vector error correction (VEC) model it is found that there exists short run bidirectional causality between garment sector development and economic growth. The significance and negative sign of test statistic of ECM(-1) denotes the existence of long run causality between garment sector development and economic growth. Therefore, it can be presumed that there is a long-run equilibrium connection between garment sector development and economic expansion in Bangladesh economy. From the estimated values of response function it can be said that with respect to one standard deviation the variable garment sector development responds positively for the next fifteen years in the variable economic growth in Bangladesh.

Published in International Journal of Business and Economics Research (Volume 10, Issue 6)
DOI 10.11648/j.ijber.20211006.15
Page(s) 246-257
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2021. Published by Science Publishing Group

Keywords

Garment Sector Development, Long-run Cointegration, VEC Model, Response Function

References
[1] Absar, S. S., (2001). Problems Surrounding Wages: The Readymade Garments Sector in Bangladesh. Labour and Management in Development Journal, Vol. 2, No. 7, pp. 1-17.
[2] Ahmed, S. (2009). Garments Industry and Women Livelihood: An Impact Study in Narayanganj District of Bangladesh. M. S Thesis, Department of Agricultural Finance, BAU, Mymensingh.
[3] Ahamed, F., (2013). Improving Social Compliance in Bangladesh's Ready-Made Garment Industry. Labour and Management in Development, 13, pp. 1-26.
[4] Ahmed, N. and Nathan, D., (2016). Improving Wages and Working Conditions in the Bangladesh Garment Sector. Labour Conditions in Asian Value Chains, pp. 51-77.
[5] Akter, J. (2013). Female Labour Migration from Rural to Urban: A Socioeconomic Study on the Garment Workers. M. S Thesis, Department of Agricultural Economics, BAU, Mymensingh.
[6] Akterujjaman, S. M. and Ahmad, M. H., (2016). Workers’ Satisfaction toward RMG Industry in Bangladesh: A Study on Dhaka and Gazipur City. International Journal of Research in Management & Business Studies, 3 (2), pp. 22-30.
[7] Bangladesh Garment Manufacturers and Exporters Association (BGMEA). Trade Information: membership and employment. Retrieved from http://www.bgmea.com.bd/ home/pages / tradeinformation. RMG Export in World from 2013 to 2015. Retrieved from www.bgmea.com.bd/home/pages/TradeInformation, Comparative statement on export of RMG and total export of Bangladesh, Retrieved from www.bgmea.com.bd/home/pages/TradeInformation
[8] Berthelemy, J. C. and Varoudakis, A. (1996). Economic growth, convergence clubs, and the role of financial development. Oxford Economic Papers, vol. 48 No. 2, pp. 300-328.
[9] Bhattacharya, D. and Rahman M. (2001). Bangladesh’s Apparel Sector: Growth Trend and the Post-MFA Challenges.” In Pratima Paul-Majumder and Binayak Sen (eds.) Growth of Garment Industry in Bangladesh: Economic and Social Dimensions. Dhaka: Bangladesh Institute of Development Studies.
[10] Begum, F. (2008). Rural Women in Urban Garments: A Study on Livelihood Pattern of Women Garment Workers at Dhaka city. M. S Thesis, Department of Rural Sociology, BAU, Mymensingh.
[11] Bhuiyan, Z. A. (2012). Present Status of Garment Workers in Bangladesh: An Analysis. Journal of Business and Management, pp. 38-44.
[12] Borensztein, E., De Gregorio, J., and Lee, J. W. (1998). How does FDI affect economic growth? Journal of International Economics, vol. 45 (1), pp. 115-135.
[13] Che J. and Gerald, W. (2006). The Economies of a Multilateral Agreement, Mimeograph.
[14] Chowdhury, N. J. and H. Ullah (2010). Socio-Economic Conditions of Female Garment Workers in Chittagong Metropoliton Area-An Empirical Study. Vol. 5, No. 2. pp. 53-70.
[15] Dickey, D. A. and Fuller W. A. (1979). Distribution of the Estimators for the Autoregressive Time Series with a Unit Root. Journal of the American Statistical Association, vol. 74, pp. 427-431.
[16] Elahi, S., Hosen, M. D. and Nizam, M. E. H., (2019). Comparative analysis in RMG industries before and after Rana Plaza incident in Bangladesh. J Textile Eng Fashion Technol, 5 (4), pp. 202-211.
[17] Engle R. F., Granger C. W. J. (1987). Co-integration and Error Correction Representation: Estimation and Testing. Econometrica, Vol. 55, pp. 251–276.
[18] Farhana, K., Syduzzaman, M., & Munir, M. S. (2015). Present Status of Workers in Ready-Made Garments Industries in Bangladesh. European Scientific Journal, 11 (7). pp. 564-574.
[19] Golam M. K., (2019). New Minimum Wage of the RMG Sector: Addressing the Issues of Non-Compliance in Implementation (No. 129). Centre for Policy Dialogue (CPD).
[20] Hasan, J., (2013). The Competitiveness of Ready Made Garments Industry of Bangladesh in Post MFA Era: How Does the Industry Behave to Face the Competitive Challenge? British Journal of Economics, Management & Trade, 3 (3): 296-306.
[21] Hasan, M. A., (2019). Minimum Wage in Readymade Garments Industry in Bangladesh. American Journal of Trade and Policy, 6 (2), pp. 57-66.
[22] Islam, N., & Chowdhuri, A. S. M. M. B. (2012). Socioeconomic Factors of Readymade Garments Workers in Bangladesh. D. U. Journal of Marketing, Vol. 15. pp. 305-25.
[23] Islam, M. S., Rakib, M. A., and Adnan, A. T. M., (2016). Ready-Made Garments Sector of Bangladesh: Its Contribution and Challenges towards Development. Journal of Asian Development Studies, 5 (2), pp. 51-61.
[24] Johansen, S. and Juselius, K. (1990). Maximum Likelihood Estimation and Inference on Cointegration- With Application to the Demand for Money. Oxford Bulletin of Economics and Statistics, Vol. 52, pp. 169-210.
[25] Khatun, R. and Shamsuzzaman, M., (2017). Job Satisfaction of RMG Sectors in Bangladesh: A Study on Female Workers of AKH Group. International Journal of Humanities & Social Science Studies (IJHSSS), 3 (6), pp. 97-106.
[26] Mridula, S. M. and K. A. Khan (2009). Working Condition and Reproductive Health Status of Female Garments Workers of Bangladesh. Study report of Bangladesh Occupational Safety, Health and Environment Foundation (OSHE), West Pantapath, Dhaka.
[27] Mustafa, A., Islam, M., S., Islam, S., & Khatun M. (2016). Impact of RMG Sector on Livelihood Change of Women Employees of Bangladesh. Social and Economic Geography, Vol. 2, No. 1, pp. 1-10.
[28] Osmani, N. M. and Hossen, B., (2018). Empowering Women in Bangladesh: A Study on the Problems of Working Women in Garments Industries. European Journal of Social Sciences, 57 (3), pp. 277-289.
[29] Granger, C. W. J., & Newbold P. (1974). Spurious regression in econometrics. Journal of Econometrics, 2, pp. 111–120.
[30] Phillips, P. C. B., and Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika, Vol. 75, pp. 335-346.
[31] Rahman, M. T., Habibullah, M., and Masum, M. A. A. (2017). Readymade Garment Industry in Bangladesh: Growth, Contribution and Challenges. IOSR Journal of Economics and Finance (IOSR-JEF), 8 (3-1), pp. 1-7.
[32] Salam, M. A., & Senasu Kalayanee (2019). Development of the Sustainability Index for the Ready-Made Garments Sector in Bangladesh. Verslas: Teorij Ir Praktika/Business: Theory and Practice, Vo. 20, pp 329-341.
[33] Salam, M. A. and McLean, G. N., (2014). Minimum Wage in Bangladesh’s Ready-made Garment Sector: Impact of Imbalanced Rates on Employee and Organization Development. HRD: Reflecting upon the Past Shaping the Future. Edinburgh Scotland: UFHRD http://www.ufhrd.co.uk/wordpress/wpcontent/uploads/2014/11/Abdus-Salam. pdf.
[34] Schumpeter, J. A. (1932). The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest and the Business Cycle. Translated by R. Opie, Cambridge, Mass.: Harvard University Press.
[35] Stock, J. H. and M. W. Watson (1988). Testing for common trends. Journal of the American Statistical Association, 83, pp. 1097–1107.
[36] Syed, R. F., (2020). Theoretical Debate on Minimum Wage Policy: A Review Landscape of Garment Manufacturing Industry in Bangladesh. Asian Journal of Business Ethics, 9 (2), pp. 211-224.
[37] Zaman A. U. and Kahn M. A. M. (2021). Minimum Wage Impact on RMG Sector of Bangladesh: Prospects, Opportunities and Challenges of New Payout Structure. International Journal of Business and Economics Research, 10 (1) pp. 8-20.
[38] World Bank Annual Report 2020.
Cite This Article
  • APA Style

    Md. Sharif Hossain, Shah Alam. (2021). Garment Sector Development Nexus Economic Growth in Bangladesh: A Dynamic Cointegration and Causality Analysis. International Journal of Business and Economics Research, 10(6), 246-257. https://doi.org/10.11648/j.ijber.20211006.15

    Copy | Download

    ACS Style

    Md. Sharif Hossain; Shah Alam. Garment Sector Development Nexus Economic Growth in Bangladesh: A Dynamic Cointegration and Causality Analysis. Int. J. Bus. Econ. Res. 2021, 10(6), 246-257. doi: 10.11648/j.ijber.20211006.15

    Copy | Download

    AMA Style

    Md. Sharif Hossain, Shah Alam. Garment Sector Development Nexus Economic Growth in Bangladesh: A Dynamic Cointegration and Causality Analysis. Int J Bus Econ Res. 2021;10(6):246-257. doi: 10.11648/j.ijber.20211006.15

    Copy | Download

  • @article{10.11648/j.ijber.20211006.15,
      author = {Md. Sharif Hossain and Shah Alam},
      title = {Garment Sector Development Nexus Economic Growth in Bangladesh: A Dynamic Cointegration and Causality Analysis},
      journal = {International Journal of Business and Economics Research},
      volume = {10},
      number = {6},
      pages = {246-257},
      doi = {10.11648/j.ijber.20211006.15},
      url = {https://doi.org/10.11648/j.ijber.20211006.15},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20211006.15},
      abstract = {In Bangladesh the garment sector is one of the major industrial sector which occupied its foremost presence in the economy of the country in terms of foreign exchange earnings, contribution to GDP, and employment generation and as well. The garment sector plays significant roles for socio-economic development and poverty alleviation in Bangladesh. The export-oriented readymade garments (RMG) sector in Bangladesh, started its journey in late 1970s as a small non-traditional sector of export. The industry began its journey from 1978 and formally started its journey in the 1980s, after that RMG sector of Bangladesh started growing, capture the market globally and providing valuable performance. In 1979 the garment sector exported only 0.672 million $ with operating 12 garment factories by 0.39 million workers but in 2020 within a span of two decays export values have gone up to 31456.73 million USD with its 4764 export oriented garment industries including 4.23 million workers. Thus an important question is usually raised by the researchers, is there a long-run cointegration relationship between garment sector development and economic growth in Bangladesh? To give the answer of this question this paper has tried to find out whether the long-run cointegration relationship exists between garment sector development and economic growth in Bangladesh economy. The study is used the times series data from 1976-2020 for garment sector development and economic growth. The existence of long-run cointegration relationship is found between garment sector development and economic growth in Bangladesh economy. From the estimated results of the vector error correction (VEC) model it is found that there exists short run bidirectional causality between garment sector development and economic growth. The significance and negative sign of test statistic of ECM(-1) denotes the existence of long run causality between garment sector development and economic growth. Therefore, it can be presumed that there is a long-run equilibrium connection between garment sector development and economic expansion in Bangladesh economy. From the estimated values of response function it can be said that with respect to one standard deviation the variable garment sector development responds positively for the next fifteen years in the variable economic growth in Bangladesh.},
     year = {2021}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - Garment Sector Development Nexus Economic Growth in Bangladesh: A Dynamic Cointegration and Causality Analysis
    AU  - Md. Sharif Hossain
    AU  - Shah Alam
    Y1  - 2021/12/24
    PY  - 2021
    N1  - https://doi.org/10.11648/j.ijber.20211006.15
    DO  - 10.11648/j.ijber.20211006.15
    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
    SP  - 246
    EP  - 257
    PB  - Science Publishing Group
    SN  - 2328-756X
    UR  - https://doi.org/10.11648/j.ijber.20211006.15
    AB  - In Bangladesh the garment sector is one of the major industrial sector which occupied its foremost presence in the economy of the country in terms of foreign exchange earnings, contribution to GDP, and employment generation and as well. The garment sector plays significant roles for socio-economic development and poverty alleviation in Bangladesh. The export-oriented readymade garments (RMG) sector in Bangladesh, started its journey in late 1970s as a small non-traditional sector of export. The industry began its journey from 1978 and formally started its journey in the 1980s, after that RMG sector of Bangladesh started growing, capture the market globally and providing valuable performance. In 1979 the garment sector exported only 0.672 million $ with operating 12 garment factories by 0.39 million workers but in 2020 within a span of two decays export values have gone up to 31456.73 million USD with its 4764 export oriented garment industries including 4.23 million workers. Thus an important question is usually raised by the researchers, is there a long-run cointegration relationship between garment sector development and economic growth in Bangladesh? To give the answer of this question this paper has tried to find out whether the long-run cointegration relationship exists between garment sector development and economic growth in Bangladesh economy. The study is used the times series data from 1976-2020 for garment sector development and economic growth. The existence of long-run cointegration relationship is found between garment sector development and economic growth in Bangladesh economy. From the estimated results of the vector error correction (VEC) model it is found that there exists short run bidirectional causality between garment sector development and economic growth. The significance and negative sign of test statistic of ECM(-1) denotes the existence of long run causality between garment sector development and economic growth. Therefore, it can be presumed that there is a long-run equilibrium connection between garment sector development and economic expansion in Bangladesh economy. From the estimated values of response function it can be said that with respect to one standard deviation the variable garment sector development responds positively for the next fifteen years in the variable economic growth in Bangladesh.
    VL  - 10
    IS  - 6
    ER  - 

    Copy | Download

Author Information
  • Faculty of Business Studies, Department of Accounting and Information Systems, University of Dhaka, Dhaka, Bangladesh

  • Faculty of Business Studies, Department of Accounting and Information Systems, University of Dhaka, Dhaka, Bangladesh

  • Sections