The effects of international scrutiny on manufacturing workers: Evidence from the Rana Plaza collapse in Bangladesh

Abstract

After the tragic factory collapse of Rana Plaza in 2013, both the direct reforms and indirect responses of retailers have plausibly affected workers in the Ready Made Garment (RMG) sector in Bangladesh. These responses included a minimum wage increase, high profile but voluntary audits, and an increased reluctance to subcontract to smaller factories. This paper estimates the net impact of these responses using six rounds of the Labor Force Survey and a triple difference approach that compares garment workers to non-garment workers, in districts containing the vast majority of export garment factories versus other districts, pre versus post Rana Plaza. As intended by the reforms, we find that increased international scrutiny improved working conditions by 0.80 standard deviations. In contrast with what the theory of compensating differentials would suggest, we do not find that workers’ wages were negatively impacted: instead, the post-Rana Plaza responses increased wages by about 10%.