Global Value Chains in Developing Countries: A Relational Perspective from Coffee and Garments

Abstract

There is a consensus that global value chains have aided developing countries' growth. This essay highlights the governance complexities arising from participating in such chains, drawing from lessons we have learned conducting research in the coffee and garment supply chains. Market power of international buyers can lead to inefficiently low wages, prices, quality standards, and poor working conditions. At the same time, some degree of market power might be needed to sustain long-term supply relationships that are beneficial in a world with incomplete contracts. We discuss how buyers’ market power and long-term supply relationships interact and how these relationships at the export-gate could be leveraged to enhance sustainability in the domestic part of the chains. We hope that the lessons learned by combining detailed data and contextual knowledge in two specific chains—coffee and garments—have broader applicability to other global value chains.

Multinational Enforcement of Labor Law: Experimental Evidence on Strengthening Occupational Safety and Health Committees

“…Firms in developing countries are lower productivity Hsieh and Klenow (2009), which suggests they have worse relational contracting capabilities (Powell (2019)) and is consistent with their adopting fewer management practices (Bloom et al (2014)). I hypothesize that lack of capacity to build relational contracts with workers may contribute to noncompliance with labor regulation (Boudreau, Cajal‐Grossi, and Macchiavello (2023)). Motivated by this possibility, in this section, I explore heterogeneity in the intervention's effects depending on factories' baseline management practices 48…”