Labor productivity in the Garment Industry

This paper investigated the factors influencing labor productivity in the garment industry in Lao PDR. This study’s emphasis was on a firm’s characteristics: labor quality, gender, age, and ownership, using a firms’ balanced panel data from 2004 to 2006 in Vientiane Capital. In order to investigate these factors, only export firms were used and the Cobb-Douglas production function was employed to obtain the results. At that time, the garment industry is relatively new in Lao PDR, there is a limited amount of published data. The data set for this analysis consists of 38 firms over a period of 3 years (2004-2006), totally it has 114 observations. There are 20 foreign firms among 38 firms in each year. The results show that an increase in 1 percent of the variable labor quality leads to an increase in a firms’ labor productivity 3.33 percent. This indicates that a firm with a large stock of educated or experienced workers will be more productive than a firm with fewer of these workers. Based on the empirical results of this analysis, it is suggested that labor quality is the most influential factor promoting a firm’s labor productivity in the garment industry in Lao PDR.