Abstract
The objective of this study is to investigate the effect of trade liberalization on employment performance of textile industry in Tanzania. The basic issue of concern is that the implementation of trade liberalization has differential impact on employment and wage in many African countries. In addressing this issue as well as achieving the objective, econometric models of employment and wage are estimated using co-integration method of analysis. The analysis shows that effective rate of protection and export intensity have an insignificant positive impact on demand for labour, but import penetration has a significant negative impact on employment. Also, only import penetration has a significant negative impact on wage. The impact of import penetration is larger than that of export orientation, as the increase in import competition leads to a decline in labour demand. These findings point to the fact that to make trade liberalization to be effectual in Tanzania, the process of trade reform needs to be gradual and also need to be strengthened with appropriate institutional support.
Highlights
The study investigates the issue of trade liberalization and employment performance in the textile and clothing industry in Tanzania. Furusawa (1999) states that trade liberalization increases the incidence of poverty, unemployment, job security, and social inequalities
The results of the analysis show that in the long-run, export intensity and import penetration affects demand of labour in the industry
The analysis of variance decomposition of wage model clearly shows that export concentration and import penetration account for more variation in wage compared to effective rate of protection
Summary
The study investigates the issue of trade liberalization and employment performance in the textile and clothing industry in Tanzania. Furusawa (1999) states that trade liberalization increases the incidence of poverty, unemployment, job security, and social inequalities. The study investigates the issue of trade liberalization and employment performance in the textile and clothing industry in Tanzania. Evidence from countries like India, Mexico, India, Russia and Tunisia indicates that trade liberalization has not negatively affect the manufacturing sector but instead increases the performance of industries in these countries. In the early 1980s there was a reduction of number of textile firms from 35 to 2 in 1996 (Mkenda, 2005). The sector suffers serious constraints leading to under utilization of local cotton product and reduction in employment creation or income generating opportunities. These reforms have impact on the labour market in terms of employment and income. Understanding the way in which employment has been affected by trade liberalization is crucial, especially with respect to income generating activities of people and its implications on poverty, welfare and standard of living
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