Export processing zone expansion in an African country: What are the labour market and gender impacts?

This study seeks to understand the labor market (employment and earnings) and gender impacts of the dramatic recent expansion of the export processing zone (the Zone Franche) in urban Madagascar. It is distinguished from most earlier empirical analysis of this subject by its use of micro data collected annually over the 1995-2002 period, and by its focus on a setting in Africa, where export processing manufacturing generally has yet to make significant inroads. As in other EPZs, workers in the Zone Franche are predominantly female, semi-skilled, and young. Controlling for worker characteristics, earnings in the Zone Franche are comparable to the private formal employment, lower than in the public sector, but much higher than in informal wage employment. By disproportionately drawing women from the low wage informal sector (where gender pay gaps are very large) to relatively well paid export processing jobs (where pay is not only higher but also similar for men and women), Zone Franche growth has the potential to contribute substantially to improved overall gender equity in earnings in the urban economy. Still, it is too early to judge whether the sector will be a source a source of long term employment characterized by continued investments in worker human capital and job advancement, or instead will conform more to the stereotypical negative picture of offering only short term jobs providing few transferable skills.