Abstract
Firms in the textile and clothing industry operate in competitive international markets characterized by the liberalized trade after the removal of multi-fiber agreement quotas in 2005, and have to address rapid changes in consumer preferences and production technology. Hence, improving competitiveness is crucial for firm survival. Competitiveness of the sector often depends on its firms meeting their production potential. This paper analyzes productivity changes in the textile and clothing industry worldwide during the period 1995–2004. A bootstrapped Malmquist approach is used to identify the respective contributions of technical change, technical efficiency change, and scale efficiency change. Moreover, differences in productivity changes across different groups of firms are statistically assessed. Our results show a relatively small overall productivity increase for both textile and clothing firms due to positive technical change, despite declines in technical and scale efficiency. Furthermore, our results indicate that productivity and its components differ for textile firms and clothing firms, for firms in countries that benefited and did not benefit from the quotas’ elimination, and for firms in different regions.
Highlights
The textile and clothing industry is facing great challenges due to its highly competitive nature and the ongoing globalization and internationalization of the textile and clothing markets
In the face of the new liberalized market, improving productivity is an important condition for competitiveness of the textile and clothing industry
The productivity increase was mainly driven by technical progress, which was partially offset by a decrease in technical efficiency and scale efficiency in both industries
Summary
The textile and clothing industry is facing great challenges due to its highly competitive nature and the ongoing globalization and internationalization of the textile and clothing markets. For over 30 years, trade relations in the textile and clothing sector were dominated by the multi-fiber agreement (MFA). The agreement played a crucial role in protecting producers from the developed world against competition from developing countries by allowing countries to impose quotas on imports of different categories of textile and clothing products. The Asian textile and clothing industry was restructuring and making considerable adjustments to reduce employment, return to profitability, decrease the number of firms, and increase efficiency (Yeung and Mok 2004). The trends of decreasing employment and number of firms are expected to continue in the international textile and clothing industry, the industry remains a relatively important sector of the economies of many developed and developing countries. In 2004, the US textile and clothing industry accounted for 8 % of the nation’s total value added in manufacturing; in Japan, China, and Italy, the industry accounted for more than 9, 11 and over 11 % of total manufacturing value added, respectively (World Bank 2005)
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