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Outlining important policy requirements for Bangladesh to become an upper middle-income country, the book presents research work conducted during the project “Changing Labor Markets in Bangladesh: Understanding Dynamics in Relation to Economic Growth and Poverty,” sponsored by the International Development Research Center (IDRC), Canada. Bangladesh has experienced remarkable economic growth rates over the last decade. The country has recently been upgraded from a low-income country (LIC) to a lower-middle-income country (LMIC) as per the World Bank’s classification system. By 2024, the country also aspires to graduate from the United Nation’s list of least developed countries (LDC). The 7th five-year plan sets an ambitious target of 8 percent growth in GDP by 2020. There are also steep development targets to be achieved under the Sustainable Development Goals (SDGs) by 2030. All these will require an enormous leap forward from the current level of economic growth rate and sustaining it in the future. The situation also calls for considerable structural change in the economy, facilitating large-scale economic diversification. Rapid expansion of labor-intensive and high-productivity sectors, both in the farm and nonfarm sectors, is thus crucial for Bangladesh. Further, this should take place in conjunction with interventions to enhance productivity, jobs and incomes in traditional and informal activities where there are large pools of surplus labor. Given its relevance for Bangladesh and applicability to many other developing countries, the book offers a unique and pioneering resource for researchers, industry watchers as well as policy makers.
This paper examines the role of the labor market in the transmission process of adjustment policies in developing countries. It begins by reviewing the recent evidence regarding the functioning of these markets. It then studies the implications of wage inertia, nominal contracts, labor market segmentation, and impediments to labor mobility for stabilization policies. The effect of labor market reforms on economic flexibility and the channels through which labor market imperfections alter the effects of structural adjustment measures are discussed next. The last part of the paper identifies a variety of issues that may require further investigation, such as the link between changes in relative wages and the distributional effects of adjustment policies.
Bangladesh is experiencing the structural transformation of its economy with increasing employment in the manufacturing sector, particularly the garment industry. At the same time, agricultural activities become more and more mechanized. These processes have major effects on rural labor markets, and thus on rural livelihoods. This study examines the implications of agricultural mechanization on agricultural wages using a unique data set of monthly wages and rice prices over the period from 1995 to 2015. Employing a dynamic panel model, estimated by generalized methods of moments, we find that increasing agricultural mechanization is associated with an increase in real agricultural wages, both in the short-run and the long-run. Hence, our estimation results dispel the concern that machines are substitutes for manual labor and reduce employment opportunities in rural Bangladesh. This has important implications for policy makers aiming for a reduction of rural poverty and the interventions which reduce extensive rural-urban migration and create more employment opportunity in the agricultural sector.
This book examines the theory and global evidence on structural transformation along with stylised facts and implications using, among others, a dynamic panel model, for South Asia. The characteristics of the structural transformation process in Bangladesh bring out the relevance of a comprehensive and inclusive South Asian ‘brand’ in view of the challenges of large population size, high burden of poverty, rising inequalities and its compulsion to achieve rapid and sustained inclusive development. The analysis highlights several distinct characteristics of Bangladesh’s structural transformation including changes in value added, trade, employment, productivity, formal-informal jobs, and opportunities for low-skilled workers. The book suggests that the manufacturing sector could not create the required number of jobs and generate rapid absolute and relative productivity gains in the Bangladesh economy. Although the services sector has largely led output and employment growth, services subsectors with strong labour absorptive capacity have low average productivity. Hence, growth-enhancing structural transformation led by these subsectors is likely to be less dynamic than required for rapid employment-creating growth in the economy. The book’s analysis on COVID-19 and cyclone Amphan shows that an integrated disaster and development paradigm is needed for Bangladesh. An inclusive and health and well-being focused structural transformation presents the pathway to advance the people-centred approach to development in Bangladesh through both vulnerability reduction and investments in sustainable development that would offset both known and unknown disaster threats. The key for Bangladesh is to skillfully manage the ‘developer’s dilemma’ of achieving both structural transformation in terms of large productivity gains and inclusive growth for reducing poverty and rising inequalities. This book is relevant to students, academicians and development practitioners and others interested in contemporary development.
The book provides a comprehensive conceptual understanding covering major challenges and pathways to progressively promote inclusive development in Bangladesh. Since independence in 1971, Bangladesh has achieved significant economic growth and social progress, but the benefits have not been shared equitably across all groups in society, and there is the demand that inclusive development should be at the core of the country’s development agenda. Analysing inclusive development in Bangladesh, the authors present it as synonymous with improving the well-being of all individuals in a comprehensive manner along with upholding the principles of equity and justice. The book shows that the multidimensionality of inclusive development facilitates the participation of all in society in development through enhancing capabilities and ensuring equal opportunities. The analysis highlights social investments in specific concerns of the marginalised and disadvantaged groups and unequal structural forces that compel the state to remain biased towards the rich and consequent ‘elite capture’ of the state in Bangladesh. Arguing that Bangladesh has moved closer towards applying the inclusive development tenets in policy making, the book’s findings show that the challenge is the absence of any generic formula to ensure that the country is moving towards a more inclusive development path. A valuable contribution to the study of Bangladesh’s changing dynamics of political, economic and social configurations and development economics, the book will be of interest to researchers in the fields of economics, Asian studies and development studies.
The soft budget constraint allowed the public enterprises to hire more workers than was necessary, with the result that losses increased and productivity remained low. For the private sector, lax credit discipline was the analogue of the soft budget constraint, with similar result in respect of productivity. As the reforms progress, particularly as fiscal and credit disciplines are strengthened, it is no longer possible to sustain the surrogate social security system. The author argues that efficiency improvements are necessary for industries in an open and outward looking economy. He also places the issue of industrial workers in the overall context of unemployment and poverty.