Social upgrading in globalized production: The case of the textile and clothing industry

• Date: 01 September 2015
• DOI: http://doi.org/10.1111/j.1564-913X.2015.00244.x
• Published date: 01 September 2015
• Author: Nathalie ROUX,Bernard GUILHON,Céline GIMET

Copyright © The authors 2015

Journal compilation © International Labour Organization 2015

International Labour Review, Vol. 154 (2015), No. 3

Social upgrading in globalized

production: The case of the textile

and clothing industry

Céline GIMET,* Bernard GUILHON** and Nathalie ROUX***

Abstract. Vertical specialization generated by the international fragmentation

of production within global networks is driven not only by comparative ad-

vantage, but also by the locational decisions of lead rms which determine the

role and bargaining power of local producers in their value chain. This study

examines the consequences of such specialization in textiles and clothing for 26

labour-abundant countries from 1990 to 20 07. Fixed effects regressions based

on panel data reveal that the industry does not always reap the benets of the

resulting international trade integration. Rather, the authors observe a negative

relationship between vertical specialization and relative real wages in the textile

and clothing industry.

The international fragmentation of production has been generating a new

international division of labour. Final goods can be produced by splitting

the overall process into geographically separate modules, giving rise to trade

in intermediate goods between producers integrated into a global production

network. The determinants of these trade ows go beyond the strict connes of

the classical theory of comparative advantage; indeed, they are also based on

the locational strategies of the rms that drive the process. The variety of terms

used to describe these developments1 highlights the fact that such internation-

alized production patterns are based both on macro-economic mechanisms

* University of Franche-Comté, CRESE (EA 318 0), CHERPA (EA 4261) and GATE-LSE-

CNRS (UMR CNRS 5824), France, email: celine.gimet@sciencespo-aix.fr. ** SKEMA Business

School, Sophia Antipolis, France, email: bernard.guilhon@skema.edu. *** University of Toulon

and Var, LEAD (EA 3163), France, email: nathalie.roux@univ-amu.fr. We thank the referees and

the editor for their constructive comments.

Responsibility for opinions expressed in signed articles rests solely with their authors, and

publication does not constitute an endorsement by the ILO.

1 Examples include “the new international division of labour” (Fröbel, Heinrichs and Kreye,

1980), “multistage production” (Dixit and Grossman, 1982), “slicing up the value chain” (Krug-

man, 1995), “disintegration of production” (Feenstra, 1998), “fragmentation” (Arndt and Kierz-

kowski, 2001), “vertical specialization” (Hummels, Ishii and Yi, 20 01), “global production sharing”

(Yeats, 20 01), and “global economic integration” (Sturgeon and Geref, 20 09).

International Labour Review304

– which have been studied from the perspective of international trade theory2 –

and on the industrial processes and/or industry strategies of rms (Geref, 1996

and 1999; Sturgeon, 2006; Sturgeon, Van Biesebroeck and Geref, 20 08). Against

this background, the traditional assumption of a causal relationship between

trade openness and specialization, on the one hand, and improvements in eco-

nomic and social performance, on the other, has been questioned.

In this article, we distinguish between the economic and social dimen-

sions of development, following the approach developed by Milberg and Win-

kler (2010) in regard to upgrading. Our research question is the following: does

the involvement of low-wage countries in global production networks generate

an improvement in their workers’ wages relative to average manufacturing

wages? We focus on the textile and clothing industry for two main reasons.

First, the characteristics of the clothing segment – unskilled-labour intensive,

using simple technologies and operating in contestable markets – have made

it accessible to many developing countries (Nordås, 2 004; Brenton and Hoppe,

2007). This industry segment has indeed played a crucial part in opening up

many developing countries to international trade and enabling them to nance

complementary productive activities. Second, the textile and clothing industry

relies on the international fragmentation of production and is conducive to

cross-trade with more developed countries (Kimura and Ando, 2005).

To test the relationship between economic development, trade openness

and improved labour conditions in industries integrated into global produc-

tion networks, we refer to the work of Milberg and Winkler (2010), Bernhardt

and Milberg (2011) and Bernhardt (2013), who distinguish between the con-

cepts of economic and social upgrading. At the industry level, economic up-

grading refers to the process by which rms evolve from low value added to

higher value added activities (Geref, 20 05). Social upgrading refers to wages,

employment and working conditions. We will try to show that these two up-

grading processes are not necessarily concurrent. In contrast with traditional

trade theory, our analysis nds that low-wage countries’ specializations in

international trade do not always yield positive outcomes when they are part

of global production networks.

The remainder of this article is organized into four sections. Following

a literature review in the rst, the second section presents our empirical ana-

lysis. Our results are discussed in the third section, while the fourth section

concludes. There is a negative relationship between vertical specialization and

relative real wages in the textile and apparel industry.

Literature review

This literature review focuses on the analysis of specialization and the effects

of fragmentation on wages.

2 See, for example, Feenstra and Hanson (1996), Deardorff (1998 and 2001), Jones and

Kierzkowski (2001), Antràs and Helpman (2004) and Grossman and Helpman (2005).