International Review of Business Research Papers
Vol. 12. No. 2., September 2016, Pages: 166 – 182
Compliance and Safety Standards of Readymade Garments Factories in Bangladesh: An Econometric Analysis
Several qualitative research studies exist relating to the operations of Readymade Garments industry that explore the working conditions and reasons behind the accidents that took place in the past. This study contributes to the existing volume of literature by conducting an econometric analysis of safety and compliance standard of RMG factories in Bangladesh. The paper treats Rana Plaza incident in the year 2013 as a natural experiment to identify any change in compliance. This study uses 561 factory observations obtained from the Alliance for Workers’ Safety Bangladesh and 39 similar observations from Fair Labor Association (FLA). A compliance index is formed using weighted average of factors which are related to the preparedness and prevention of fire in factories, and structural safety in buildings. Two levels of econometric estimation include an ordered probit analysis of factory characteristics and probit analysis to identify change in compliance nature after Rana Plaza. Findings reveal that premises owned by factories increases the chances of compliance. Moreover a greater number of operating units used by factories lower the chances of compliance. It is also evident that factory locations tend to affect the compliance standard. Lastly, the paper finds that an improvement in the performance of compliance standards of factories has occurred after the Rana Plaza incident in 2013.