The impact of export processing zones on employment, wages and labour conditions in developing countries

Tempo de leitura: 2 minutos

Export processing zones (EPZs), also called free trade zones, are one of the most common instruments of industrial policy in developed and developing countries. Despite their proliferation and spread across all countries in the world, there is little evidence about the impact that EPZs have on employment and wages. More importantly, EPZs have been heavily scrutinised by civil society, often accused of employing a ‘race to the bottom’ strategy in terms of labour conditions.

The objective of this systematic review, therefore, is to collect, review and synthesise the evidence in relation to the impact of EPZs on employment, wages and labour conditions – specifically on freedom of association, health and safety and working hours – in developing countries. In so doing, we only included studies that provide some comparison with labour outcomes outside the zone, thus establishing some degree of attribution between EPZs and labour outcomes.

The results of synthesising 59 studies suggest very mixed results in relation to these labour outcomes. There is no convincing evidence on whether the employment created in the zones is additional, although some studies suggest that a significant proportion is likely to be additional.

There is weak support for the idea of feminisation of the labour force in EPZs, although this is difficult to disentangle from the sector composition of EPZs, or for a positive impact of EPZs in female labour participation.

In most cases, EPZs pay higher wages and do not contribute to an increase in the gender wage gap. There is evidence of problems with unionisation, which is legally discouraged in some cases. However, even where there are no legal restrictions to unionisation, comparing terms of employment with firms outside the EPZ gives mixed results.

The evidence regarding health and safety is also mixed: some studies document a higher prevalence of health problems within EPZs, while others find higher prevalence in firms outside the zone.

Finally, there is evidence of long working hours in EPZs, in some cases compulsory and inadequately remunerated. However, when compared with working hours in firms outside the zone, the evidence is again mixed.

The evidence reviewed suggests that there are several methodological problems with the studies analysed. First, the issue of additionality of employment has not been correctly addressed in the literature. Second, it is likely that the motivation for some of the studies is the existence of previous labour controversies in specific EPZs, which may imply the underrepresentation of studies in areas where there have not been major labour disputes, and a bias towards negative results. Third, the relevance of some of the old studies analysed is not clear, given the increasing change in sector composition and adoption of private and international labour standards in some sectors and EPZs.

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