Export Processing Zone Expansion in Madagascar: What are the Labor Market and Gender Impacts?

This paper analyses part of the controversy over export processing zones (EPZs)—the labour market and gender impacts—using unique time-series labour force survey data from an African setting: urban Madagascar, in which the EPZ (or Zone Franche) grew very rapidly during the 1990s. Employment in the Zone Franche exhibits some basic patterns seen elsewhere in export processing industries of the developing world, such as the predominance of young, semi-skilled female workers. Taking advantage of microdata availability, we estimate earnings regressions to assess sector and gender wage premia. Zone Franche employment is found to represent a significant step-up in pay for women who would otherwise be found in poorly remunerated informal sector work. As it provides relatively high wage opportunities for those with relatively low levels of schooling, export processing development may also eventually have significant impacts on poverty. Further, by disproportionately drawing women from the low-wage informal sector (where the gender pay gap is very large) to the relatively well-paid export processing jobs (where pay is not only higher but also similar for men and women with similar qualifications), the EPZ has the potential to contribute to improved overall gender equity in earnings in the urban economy. Along many non-wage dimensions, jobs in the EPZ are comparable to or even superior to other parts of the formal sector. However, the sector is also marked by very long working hours and high turnover, which may work to prevent it from being a source of long-term employment and economic advancement for women.