Volume: 21, Issue: 1

Page: 54-66
International Journal of Science and Business
2023
Journal homepage: ijsab.com/ijsb

Labor Productivity analysis in Lao PDR

Case study: Garment, Furniture and food-
beverage industry
Khampheng KINGKHAMBANG, Bounmy INTHAKESONE, Neevanh SAYNAVONG,
Phoxay PHANHONKEO, Phonexay CHANTHATHAB & Khaysy SRITHILAT

Abstract
Growth in labor productivity is crucial to economic growth and has an
important role to increase worker incomes. As a result, this study has
analyzed the level of labor productivity in three industries, such as furniture,
food-beverage, and clothing industry, and studies of factors affecting labor
productivity. The study found that only large textile industries with higher
productivity and positive value were positive. Generally, manufacturing
output is lower than that of manufacturing, with only large garment industry
IJSB
with higher labor productivity than zero, both in manufacturing, Accepted 25 April 2023
manufacturing and outside manufacturing. In addition, all three industries Published 27 April 2023
DOI: 10.58970/IJSB.20756
have a higher remuneration than average labor per capita per month,
whether for production, manufacturing or outside production. But the small-
scale food-beverage industry is characterized by lower labor productivity
than labor-intensive remuneration, and the medium-sized garment industry
is lower than the third-generation labor productivity of less than three times
a month. Thus, the wage determination of these groups should be delineated
ISSN: 2520-4750 (Online) 2521-3040 (Print)
so that it can provide an incentive to the labor force and increase the level of
labor productivity. In addition, the government should focus on building a
vocational training promotion and training program for Lao workers, as well
as building labor productivity awareness among entrepreneurs, especially
Papers published by IJSAB International are
licensed under a Creative Commons Attribution-
NonCommercial 4.0 International License.
Lao entrepreneurs, in order to stimulate labor productivity.

Keywords: Labor productivity, manufacturing productivity, labor remuneration, Garment, Furniture,

food-beverage.

About Author (s)

Khampheng KINGKHAMBANG (corresponding author), Faculty of Economics and

Business Management, National University of Laos, Laos.
Bounmy INTHAKESONE, Faculty of Economics and Business Management, National
University of Laos, Laos.
Neevanh SAYNAVONG, Faculty of Economics and Business Management, National University
of Laos, Laos.
Phoxay PHANHONKEO, Faculty of Economics and Business Management, National
University of Laos, Laos.
Phonexay CHANTHATHAB, Faculty of Economics and Business Management, National
University of Laos, Laos.
Khaysy SRITHILAT, Faculty of Economics and Business Management, National University of
Laos, Laos. 54
IJSB Volume: 21, Issue: 1 Year: 2023 Page: 54-66

I. Introduction.
Labor productivity is an important tool in economic development, especially in human capital
development. Promotion of labor productivity may be able to stimulate economic growth and
reduce poverty. Thus, developing countries, including Lao PDR, have developed a number of
policies to stimulate labor productivity, of which expenditures on education are not limited to
education in the system, but also oriented on polytechnic system, training and so on, including
research and development (R & D), which may stimulate growth in labor productivity in some
levels. As the growth of labor productivity is another important factor in maintaining economic
growth (Bervidova, 2002), the Government of Lao PDR, especially the Ministry of Education
and Sports, has reformed education by encouraging and supporting the establishment of
vocational schools in all provinces throughout the country. There are currently 64 vocational
schools across the country (Ministry of Education and Sport, 2014). In addition to the policy of
promoting vocational schools, the government has also introduced minimum wage laws and
increased the rate from 26,000 kip (approximately US $ 36) in 1991 to 900,000 kip (about US
$ 111) in 2015 (Ministry of Education and Sports, 2015). However, at the macro level, the
productivity of Lao workers is still lower among the countries in ASEAN. APO (2015) shows
that Lao labor productivity per working hour is about 8.4 in 2013 (using GDP at low prices for
working hours or PPP in 2011, using 2013 as reference years), which is higher than the two
countries, Myanmar and Cambodia. But in view of the rising rate of labor productivity in
Myanmar, it is estimated that higher labor productivity in Lao PDR is about 381 percent from
1990 to 2013, while in Laos, only 163 percent increase over the same period (APO, 2013). From
this issue, the Lao PDR may consider the low competitiveness of the economic system as well.
Labor productivity research in Laos is limited, however there is work being done in the
garment sector (UNIDO, 2003, Soukavong, 2004, Sakurai and Ogawa, 2005; Oraboune, 2005,
Wongpit, 2006, Boupha, 2006). According to UNIDO (2003), even though the Lao garment
industry has relatively low labor costs, it is not an advantageous factor or an interesting sector
for foreign investors because the labor force in this industry is low-skilled labor and
incompetent to work in a complex labor-intensive task. It doesn't matter if it's labor
productivity or capital production. Furthermore, UNIDO shows the negative consequences of
Lao garment exports following the termination of the Multi-Fiber Agreement (MFA) in 2005.
Soukavong and the panel (2004), on the other hand, used the RCA model from such research
to investigate the comparative advantage of the Lao textile sector sold to all ten ASEAN nations.
Because Lao labor is low in skill and productivity, the garment sector in Lao PDR has a
comparative advantage due to cheap labor costs, which is a primary reason for greater garment
and textile exports and international investor interest. Sakurai, Ogawa and panel (2005)
conducted a study of 21 garment manufacturers in the capital Vientiane, which represented for
approximately 21.4 percent of total Lao industrial sewing. The survey results revealed that Lao
labor was poor in productivity and skill. The report also recommends three reasons as the
cause of labor productivity under skilled labor shortages, excessive absenteeism, and low
worker retention. Although, there were some studies on productivities related to the
productivities. But most of them were focusing on the garment industrial with a simple analysis
technique, this study will employ primary models and quantitative models based on a
geometric model to identify the factors influencing labor productivity in the Lao PDR, utilizing
data from three industrial sectors: the garment industry, the food and beverage industry, and
the wood processing industry.

II. Literature review.

The productivity of labor is reflected in the growth of the economy, through a variety of
research found that the growth of productivity of labor is very important to develop economic
(Steindel and Striroh, 2001) causes so because the rate of growth of productivity of labor

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impacts significantly on production real gross product matches domestic which is to raise the
standard of living of the people as such productivity labor therefore used as an indicator rate
of growth of productivity in the country. Labor productivity is a matter that researchers have
long been interested in, but the labor productivity was not measured by the strength of labor,
but Zakharov, Sidorov and Smirnov (1977) said that the productivity of the labor force was not
based on the strength of labor but it was dependent on a number of factors such as skills,
capacity, experience and so on. In addition, the use of technology is another factor affecting
labor productivity, with the exception of the three mentioned above, there are also many
studies on labor productivity using the National Accounts Growth and Rendering Process to
Control the Quality of Raw Materials (Jorgenson, Gollop, and Fraumeni, 1987, Jorgenson and
Griliches, 1995). The main assumption behind this model is that examine the relationship
between labor productivity and material or equipment intolerance, labor quality and other
performance variables. In addition to the above-mentioned studies, some studies have found
that labor productivity depends on quantity and quality of raw materials, efforts to develop
corporate personnel and the use of technology, as well as factors affecting domestic and
external markets (Covers, 1996, Mei Hsu and Been-Lon Chen, 2000). This is a two-factor
process in manufacturing. The size of the plants, especially plants larger fisheries is expected
to increase the productivity of labor, quality of labor better plants small, some research has
suggested that the growth of productivity of labor largely depend on the characteristics of
plants or organizations such as the type of owner plant, type of gender plant, the size of the
plant, steam The composition and level of training of staff or investment in research and
development (R & D), in addition also to pay rates and other factors that cannot be determined
(Stigler, 1958; Evans, 1987; Aw and Hwang, 1995). In addition to the factors that have been
mentioned, the fact that foreign-owned factories or foreign companies are an important factor
as Aw and Hwang (1995) have said that the performance of a firm or exporting factory is better
than a non-exported company, and there are also many studies that confirm that the company
has the best operating results. However, the impact of foreign-born companies and foreign
relations has many aspects, such as in the United States, exports do not have a positive effect
on the company's performance (Bernard and Jensen, 1999). Kimura and Kiyota (2003) have
discovered that export and foreign direct investment (FDI) is a catalyst for Japan's
performance. Some research has explored the role of foreign companies affecting development
in a number of countries, such as Globerman, Ries and Vertinsky (1994), used data from 1986
factories to study the relationship between labor productivity with foreign ownership and
found that firms representing foreigners had higher labor productivity than domestic firms. In
addition, studies of Aw and Hwang (1995) for Taiwan; Robert et al. 1995; For the United States;
Robert and Tybout (1997) for Colombia. But some of the benefits of education have a different
effect on the performance of local firms than foreign companies. Doms and Jensen (1998) used
factory-level data to distinguish the characteristics of the factory, such as the overall
productivity of the plant and the labor productivity of the labor market, compared to between
home-owned factories and foreign-owned factories. The study found that foreign companies
or factories had higher yields, higher concentrations and hiring higher rates. By used the size
of the plant, the location of the plant and Change Control addition, they studied the differences
between the characteristics of special factory foreign plants with the American plants, study
found that plants with a joint venture to produce better, a bigger, stronger investment and
more jobs at a rate higher than the results of such research they can conclude that the major
problem is not dependent on a foreign company and depends on the characteristics of common
stock. Ramstette (2003) have suggested that the relationship between company owners are
foreign to the productivity of labor is relatively low in the case of Thailand, but nonetheless
Hallward-Diremeir, Iarossi and Sokoloff (2000) confirmed that the company owners are
foreign in the countries of East Asia is the action that the company does not have a foreigner

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they use query level management from 1996 to 1998 in 5 countries in East Asia such as
Indonesia, South Korea, Malaysia, Philippines and Thailand from The survey found that about
2,700 of the participants, then using the size of the plant, exporting to a change in control of the
sector, the study found that factory owners are foreign products higher if compared to the
factory owner is local within 4 all countries except South Korea. Studies in recent years indicate
that factory owners are foreign not only features special better and grow faster as the
productivity of production and profits, moreover with profit than not determines the
characteristics and special ownership of the potential growth in the future (Kimura and Kiyota,
2004) Based on this study they remark that investors foreigners choose to invest in companies
with no profits immediately but chose to invest in companies with the potential to grow and
affect operations in the future. Foreign companies do not look for short-term companies, but
they have studied long-term effects and stability. According to the review theory and research
previously found that the size of the plants are the advantages and disadvantages of different;
research previously tried to find parameters that plants larger or small to be less effective than
based on theoretical economics micro particular theory economies of scale, this theory was
presented that the plants should increase up to the average cost minimum under proper up
place Acs and Audtresch (1990), Aiginger and Tichy (1991) stated that during the 1950s until
1970 theory that is accepted by economists and politicians until Burns & Dewhurst (1996)
found that the small company and medium plays a very important role in developing the
economy of the country, especially the least developed specifically as creating jobs the workers.
So the government should promote the country's economy by focusing on small businesses
(Harper & Soon, 1979). Many previous studies show that growth in production units is
declining over time (Sutton, 1997), and Brron, along with the 1994 panel, show that the
relationship between growth and growth rates is independent of each other, based on
examples from the solitary industry and the hybrid industry. Many researchers found that the
potential growth of unit production is very important in the beginning stages of assembly
(Storey & Tether 1998; Delmar along with panel 2003), but however Reynold (1987) was the
difference, which he said the old structure of the business is a small one of several factors that
affect the capacity of the unit production and is part of creating jobs Furthermore, the new
shows that business units are growing rate of growth than the business units doing business
longer. The age of entrepreneurship is related to the business decision making process and the
business performance. Development of human resources and training is a factor affecting the
productivity of production units and is widely recognized in the development of the country's
economy. Several previous studies have demonstrated the role and importance of human
resource development and training factors (Mason and Finegold, 1997). At the enterprise level,
the collection of information on productivity and human resource development is limited,
especially on training information. However, studied by Black and Lynch (1996), which uses
Cobb-Douglas's production policy to analyze human resource development in each of
production units, they conducted a survey of about 3,000 business units in United States in
1993 and the results of the research show that plants with education average wage higher
productivity higher, in terms of training study suggests that some plants trained to interact in
a positive productivity but some plants are no results depending on the nature of the training,
such as training in the workplace, Training outside the workplace. For non-industrial business
units, the results of the study indicate that the training of using computer is affecting the overall
production of the plant. In addition to investing in human resources development, investment
in research and development has an impact on labor productivity, especially at the factory
level. According to a number of previous studies, investments in research and development
have a positive and statistically significant on labor productivity, with personal income rising
by about 20 to 30 percent (Griliches, 1986, Cohen, 1995, Nadiri, 1993, and Mohnen, 1992). For
Laos, the study of labor productivity is limited, but there is a study of labor productivity in the

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garment industry (UNIDO, 2003, Soukavong, 2004, Sakurai and Ogawa, 2005; Oraboune, 2005,
Wongpit, 2006, Boupha, 2006). For UNIDO (2003), although the Lao garment industry has
relatively low labor costs, it does not mean that it is an advantageous factor and an interesting
sector of foreign investors, because the labor force in this industry is low-skilled labor and
incompetent to work in a complex labor-intensive task. Whether it is a labor productivity or
capital production. In addition, UNIDO also demonstrates the adverse effects of Lao garment
exports after the revocation of the Multi-Fiber Agreement (MFA) in 2005. However, Soukavong
and the panel (2004) have explored the comparative advantage of the Lao garment industry
exported to all 10 ASEAN countries using the RCA model from such studies to achieve the
opposite direction. Because Lao labor is low on skill and low productivity, the garment industry
in Lao PDR has a comparative advantage resulting from low labor costs and this is a major
cause of the export more of garment, textile and it is interested of foreigner investors. Sakurai,
Ogawa with panel (2005), the survey of 21 garment factories in the capital Vientiane, which
accounted for about 21.4 percent of industrial sewing all Lao result of the survey showed that
Lao labor was productivity and low skill, in addition The survey also suggests 3 factors as the
cause productivity labor under the labor shortage of skilled, the rate of absenteeism is high and
the rate of keep the labor is low.

III. Data and Methodology

3.1. Data.
This study uses the micro level information using questionnaires collected from three
industries, garment, furniture and food-beverage industries in three provinces: Vientiane
capital, Savannakhet and Champassak. By collecting, we can collect industry samples from 93
industries, which consist of 35 garment industries, 25 furniture industries and 33 food
industries.

3.2 Model Specification

In the analysis of the value of labor-intensive microeconomics, the use of quantitative methods
is used, especially in the analysis of factors affecting labor productivity using multiple
regressions. Therefore, this study will start with the estimation of labor productivity from data
from surveys in three industries and from three provinces in Lao PDR.

Average labor productivity can be estimated as follows:

APL = LVA TMH i (1)
APLP = (LVA − PCOM ) TMH i (2)
APLNP = (LVA − NPCOM ) TMH i (3)
Where:
APL : Average labor productivity of all workers
LVA : The total value of labor (Kip / hour / person) equivalent to TR-TC (excluding
costs)
APLP : Average labor productivity of labor in the manufacturing sector
APLNP : Average labor productivity of workers not in the manufacturing sector

Total revenue can be calculated as follows:

TR = TSAE + TSAM + TARM + REV + OTHR (4)
Where:
TR : Total revenue of the industry
TSAE : Total sales of industrial output
TSAM : Total sales of output by other industries with contract production

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TARM : Total sales of finished goods purchased and sold in preliminary condition
REV : Income from manufacturing products to other industries
OTHR : Other income related to industrial production

Costs can be calculated as follows:

TC = CRM + PCOM + CLE + CLN + PIPJ + PIPD + SADC
+ OTHC + SADC + NPCOM (5)
Which:
TC : Total cost of production (excluding labor cost)
CRM : Cost of raw materials and other materials
PCOM : Total cost of salary, wages, overtime, welfare and expenses paid in the
manufacturing sector (excluding foreign workers)
CLE : Labor costs paid to the contracted industry and others
CLN : Cost or cost of production
PIPJ : Productivity value at the beginning of the period is on 1 January in the year of
study
(if any)
PIPD : Productivity value at the end of the period is on 31 December in the year of study
(if any)
OTHC : Other production costs, other than those mentioned above
SADC : Cost of sales and management
NPCOM : Total cost of salary, wages, overtime, welfare and expenses paid to non-
manufacturing workers (excluding foreign workers)

Working hours can be calculated as follows:

TMH i = N i (RWH i + OTIM i − ABS i − CHDi ) (6)

By:
TMH i : Working hours included
N: All workers are hired
RWH : The number of hours worked per calendar year
OTIM : The number of hours worked during business days and holidays
ABS : Number of days of absence of workers or employees other than legal holidays
CHD : The number of legal holidays per year generally at least 13 days a year
i: Are workers in the manufacturing and non-manufacturing sectors?

After we calculate the productivity of labor, we can analyze the factors affecting labor
productivity:
𝑃𝐴𝐿 = 𝐹𝐼𝑋𝐴𝑆 𝛼 𝑉𝐴𝑅𝐴𝑆𝛽 𝑒 𝑋𝑖 (7)
By 𝑋𝑖 Factors affecting labor productivity, logarithm into two parts, and can write new
models:
ln⁡(𝐴𝑃𝐿) = 𝛽0 + 𝛽1 ln⁡(𝐹𝐼𝑋𝐴𝑆) + 𝛽2 ln⁡(𝑉𝐴𝑅𝐴𝑆) + 𝛽3 𝑂𝑃𝐸𝑅 + 𝛽4 𝑃𝑅𝑂𝐸𝐷1/𝐿
+𝛽5 𝑃𝑅𝑂𝐸𝐷2/𝐿 + 𝛽6 𝑀𝐴𝑁𝐸𝐷1/𝐿 + 𝛽7 𝑀𝐴𝑁𝐸𝐷2/𝐿 + 𝛽8 𝑇𝑌𝑃𝐸 + ⁡ 𝛽9 𝐼𝑁𝐷𝑈𝑆𝑇𝑅𝑌⁡⁡⁡⁡⁡(4)

By:
APL : Labor productivity of the sample industry, derived from the average wage of labor
(kip / hour /person)\
COM : Workers' Compensation (kip / hour / person)
FIXAS : Fixed assets (including land values and industry value)

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VARAS : Revolving assets (include the value of machinery and equipment used in the
manufacturing process, in research and development, and in the office, and in the value of
vehicles and other assets in the business)
OPER : Number of years in operation
PROED1 L : The proportion of workers or staff in the manufacturing sector with the primary
and secondary education levels for all workers
PROED 2 L : The proportion of workers or staff in the manufacturing sector with the level of
education in the polytechnic, bachelor and higher levels of education for all workers
MANED1 L : The proportion of workers or employees not in the manufacturing sector with the
primary and secondary education levels for all workers
MANED 2 L : The proportion of workers or employees not in the manufacturing sector with
the education in the polytechnic, bachelor and higher levels of education for all workers
TYPE: The nature of the operator is equal to 1 if the investor is 100% Lao investor and
has the same amount of 0
INDUSTRY : Type industry equals 1 if the garment industry and other value 0
1...9 : Coefficient to be estimated

IV. Results and Discussion

4.1 Sample Selection
From the survey, industry samples were mostly from business units operating in Vientiane
capital, covering more than 50 percent of the total sample, especially the garment industry,
accounting for more than 35 percent of the total industry (Table 1). Of the 31 garment
factories operating in Vientiane capital, the sample industry from Champasak province was
collected less than the sample from other provinces. As a result, Vientiane Capital is a country's
economic hub, with a lower production factor than other provinces, with convenient
infrastructure and convenient access to markets in other provinces. Thus, industrial units,
especially the garment industry, operate in Vientiane capital over other provinces in the
country.

Table 1: Sample industry

Province Furniture Food Garment Fotal
Frequency Percent Frequency Percent Frequency Percent Frequency Percent
Champasak 6 24 6 18.2 2 5.7 14 15.1
Savanhnakhet 11 44 14 42.4 2 5.7 27 29.0
Veintiane capital 8 32 13 39.4 31 88.6 52 55.9
25 33 35 93
Total 100 100 100 100
(26.9) (35.5) (37.6) (100)

4.2. The size of the sample by industry

In analysis example industry, most furniture and food industries are small, with between 1 and
19 workers (Table 2). But in contrast to the garment industry, the bulk of the labor force is
over 100 workers, accounting for more than 80 percent of the total cut-off industry. Because
the example garment industry is primarily a manufacturing industry for export and possibly
an industry that operates in the form of a single limited company, it is largely due to the large
financial capacity to expand its operations to meet international demand. But if we look at the
overall figure, this sample industry is mostly small, accounting for about 44 percent of the
sample. Because the furniture and food industry in Lao PDR is still a family-based industry,
most of them are small.

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Table 2: The size of the sample industry

Furniture Food Garment Total
Frequency Percent Frequency Percent Frequency Percent Frequency Percent
Small (1-19) 22 66.7 19 76 0 0 41 44.1
Medium (20-99) 8 24.2 4 16 6 17.1 18 19.4
Large (> = 100) 3 9.1 2 8 29 82.9 34 36.6
Total 33 100 25 100 35 100 93 100

4.3. The location of the sample industry

Example industry more than 70 percent are located in industrial shown in (Table 3), that could
mean that the industry might not be comfortable doing business like industry located in industrial
and may make the cost of production may be higher, which may affect the productivity of labor
industries.
Table 3: The location of the sample industry
Furniture Food Garment Total
Frequency Percent Frequency Percent Frequency Percent Frequency Percent
In
industrial 8 24.2 6 24 11 31.4 25 26.9
zone
Outside
industrial 25 75.8 19 76 24 68.6 68 73.1
zone
Total 33 100 25 100 35 100 93 100

4.4. Model of the sample industry

Most sample industries have a single model of operating alone, which accounts for up to 70
percent (Table 4). The furniture and food industry accounts for a very high percentage, so the two
industries are as small as analyzed above. Noteworthy is that the garment industry has not small
number of businesses with a limited liability company, accounting for about 37 percent of the total
simple garment industry.
Table 4: Model of the sample industry
Furniture Food Garment Total
Frequency Percent Frequency Percent Frequency Percent Frequency Percent
Owner alone 30 90.9 21 84.0 14 40.0 65 69.9
Joint venture 0 0 1 4.0 8 22.9 9 9.7
Company
3 9.1 2 8.0 13 37.1 18 19.4
Limited
Other 0 0 1 4.0 0 0.0 1 1
Total 33 100 25 100 35 100 93 100

4.5. Descriptive Statistic

After checking the data to see the unusual information and use logarithm to facilitate the
description of the factors that affect the labor productivity in the industry of Laos that the data
can actually model total 85 factories and no unusual or as basis of statistics, and details of the
independent variables and variables such as the average value, standard deviation values ,
minimum and maximum values are shown in (Table 5) below:

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Table 5: Descriptive Statistic

variable Number Average Standard deviation Minimum Maximum
Ln(APL) 85 3.521 0.852 0.693 4.477
Ln(FIXAS) 85 21.391 1.653 17.088 24.913
Ln(VARAS) 85 21.411 2.538 15.598 28.254
OPER 85 12.423 7.711 1 27
PROED1/L 85 0.962 0.341 0 0.985
PROED2/L 85 0.039 0.094 0 0.6
MAED1/L 85 0.074 0.103 0 0.588
MAED2/L 85 0.074 0.085 0 0.4
TYPE 85 0.635 0.484 0 1
INDUSTRY 85 0.376 0.487 0 1

In order to ensure that the results of the regression are not distorted or clear and that it is
closer to reality, this study examines the relationship between independent variables.
(Multicollinearity problem) And from the results of the audit (Correlation Matrix). Generally
it is showed that the relationship of the variants is in principle or, in other words, there is no
problem of the self-reliance of independent variables, due to each independent variable has no
relation of 0.7. The results of analyzing data with the least number of methods are shown in
the (table 29) from the results rather than the value (Adjusted R-squared) equal 0.359,
Depending on the characteristics of the data; this result demonstrates that independent
variables can explain well variables. (Woodridge, page 62), At the same time F-test value
equal 6.23 and P-value equal 0.0000, This shows that the result of the estimated regression
can be statistically applied in a 99 percent confidence level. In addition to the above statistics,
it is to confirm the accuracy of the expected results and to confirm T-statistics value The
researchers have found true statistical confidence, this study also examines the probability of
change in error or problem ( hetteroskedasticity) Using the method of (Breusch-Pagan and
Cook-weisberge test) can see the value Chi2 (9) =13.521 and P-value value equal 0.144,
That shows that we cannot deny the zero assumption (H0) or In other words, there is no
problem (hetteroskedasticity).

4.6. Results of OLS regression

In the regression model (Table 6) shows that factors that affect statistical labor
productivity in 3 sectors industry in Laos, especially in Vientiane capital, Savannakhet and
Champasak province is the revolving assets, the ratio of labor or employees in the division of
the manufacturing sector that there are education level in polytechnic, Bachelor and higher
levels of employment, characteristics of entrepreneur and type of industry; factors that do not
have a statistically significant impact on labor productivity in Lao PDR are fixed assets, number
of years in operation, percentage of labor or employees in the manufacturing sector there are
education level with primary and secondary education levels for all labors,. According to
(Table 4) shows that revolving asset factors are linked to labor productivity in the opposite
direction and statistically significant with a 95% confidence level, which means that the asset
is up 1%, labor productivity will fall 0.11%. The reason is that the increase in the revolving
assets is the result of the increase in raw materials and, in general, the increase in raw materials
to increase production, thereby labor productivity or remuneration for working hours
increase. In the sample industry, however, labor productivity or remuneration for working
hours does not increase or decrease, probably due to labor in the sample industry has low
quality of work. The factors of proportion of labor or employees in the manufacturing sector
that there are levels of education, polytechnic, bachelor and higher levels are linked to labor
productivity and statistical significance with a 99 percent confidence level. This means that the
proportion of labor or employees in the manufacturing sector that there are levels of education,

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polytechnic, bachelor and higher levels of total labor increases, the proportion of labor
productivity decrease 21.83 percent, From the results of this study are incorrect and not
theoretical, but the industry is more labor-intensive, and mostly in these industries, the labor
force is relatively low education and accounts for more than 95 percent of the total labor force.
As a result, labor productivity is mainly attributable to a portion of the labor force. The causes
of lower productivity may be that high-skilled labor do not fully exploit their skills, or may be
due to a lack of knowledge of what is currently being done. Factor of entrepreneurial nature or,
in other words, the business owner is having a positive or even positive relationship with labor
productivity and statistical significance with a 95 percent confidence level, That compares
labor productivity of business units that entrepreneurs is Lao will higher labor productivity of
business units entrepreneurs who are foreigners or about 0.5 times, because mostly
industries that the respondents consumed inside and owners of Lao have more than foreigners.
In addition to the three factors above, industrial factors are also one of the factors contributing
to the same direction in terms of labor productivity and statistical significance with a 99
percent confidence level. In terms of comparing the garment industry to the food processing
industry and the furniture industry, it shows that the garment industry will have labor
productivity more than two industrial. Compared to 1.13 times, this may be due to the fact
that the garment industry is a highly industrialized and requires highly skilled labor.
For factors that affect the statistics of labor production in Laos are fixed assets, number of years
in operation, the ratio of labor or employees in the division of manufacturing sector there are
level education in primary and secondary on the whole labors, the proportion of labor or
employees that non in the manufacturing sector has level education in primary and secondary
on total labors and rate of labor or employees that non in the manufacturing sector has level
education, polytechnic, Bachelor and higher levels of employment, but if you look at the
economy the mark and relationship is a theoretical and means in economics, causes no means
the statistics may come from a sample of relatively small and the characteristics of each
industry.

According to the results of the overall labor productivity in 3 industry sectors in Laos,
especially in Vientiane capital, Savannakhet and Champasak province are relatively low, it
showed that increase of revolving assets, in addition to the labor productivity is industry
intensive better samples industry that reflect the level of education or quality of labor in Laos
is relatively low and foreign-owned enterprises are not the main factors in promoting labor
productivity in Lao PDR.

Table 6: Results from the model

Variable Coefficient Standard error T-statistic value
CONS 1.755 1.337 1.313
Ln(FIXAS) 0.081 0.054 1.500
Ln(VARAS) -0.115** 0.043 -2.674
OPER 0.003 0.011 0.273
PROED1/L 0.524 0.274 1.912
PROED2/L -21.837*** 6.761 -3.230
MAED1/L 0.077 0.645 0.119
MAED2/L 0.851 1.036 0.821
TYPE 0.475** 0.213 2.230
INDUSTRY 1.133*** 0.228 4.969
Number of sample
85
groups
F(9,75) 6.23
R-squared 0.427
Adj R-squared 0.359
Note: (**) is 95% confidence level, (***) is 99% confidence level.

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V. Conclusion.
Labor productivity has been recognized as one of the most important and crucial indicators of
economic development in the world, so labor productivity upgrades are needed in the
country's development process to increase production productivity, which will pave the way
for economic growth and sustainable income generation in the country. As a result, this study
has analyzed labor productivity levels in three industries, such as furniture, food-beverage and
garment, to measure the range of labor productivity and factors affecting labor productivity.
The study found that the small furniture and food-beverage industries have higher labor
productivity than the medium and large, the garment sector is the opposite, larger than the
medium and higher value. Comparing labor productivity between the manufacturing and non-
manufacturing labor force, manufacturing output is lower than that of manufacturing, at least
three times the proportion of manufacturing labor productivity. Only the large textile industry
has higher labor productivity than zero, both in manufacturing, manufacturing and outside
manufacturing, and in manufacturing, manufacturing output is 17.9 times higher than
manufacturing productivity. This may be due to the fact that the large garment industry mainly
operates more than 50 percent of foreign and foreign companies, making foreign employment
outside the manufacturing sector, mostly foreign workers, who are more experienced and
more knowledgeable than Lao workers in the manufacturing sector. Additionally, when
comparing labor productivity levels with labor remuneration, it shows that the three industries
are more likely to have higher compensation labor than labor productivity average labor per
person per month, whether it is manufacturing labor sector and outside manufacturing labor
sector in three industrial sizes. However, there is a small food-beverage industry that there is
labor productivity manufacturing labor sector lower than the average labor wage, and the
medium-sized that there is labor productivity outside manufacturing labor sector lower than
compensation labor of less than three times a month. This means that the manufacturing labor
sector and outside manufacturing labor sector in the industry works more than the
remuneration received in a month. The results of the study found that factors affecting the
productivity of labor in 3 sectors industry in Laos, especially in Vientiane capital, Savannakhet
and Champasak province is asset rotation, the ratio of labor or employees in the manufacturing
sector there are level of education in polytechnic, Bachelor and higher levels, characterise of
entrepreneurial and type industries, from sample industry overall labor productivity in Laos
lower. It shows that the increase of the revolving assets, the level of education not affect
positively enhancing the labor productivity. In addition, labor-intensive is better than other
sample industries, this reflects the low level of education or quality of labor in Lao PDR, and
foreign-owned enterprises are not the main factors in promoting labor productivity in Lao PDR.
This problem may cause labor not enthusiastic to work and may lead to lower labor
productivity levels, so the wage setting of these groups should be considered to be more
incentive for workers to cope with and increase the level of labor productivity. In addition, the
government should focus on building a professional training and training program for Lao
workers, as well as creating labor productivity awareness for entrepreneurs, especially Lao
entrepreneurs, to actively stimulate labor productivity. From the results of study is showed
that, education does not have a positive impact on the development of labor productivity, so
building human resources in terms of the job, in other words, creating vocational chapters is
something the government should pay special attention to. In addition, the study also shows
that foreign entrepreneurs are not the main factors in promoting labor productivity in Lao PDR.
Therefore, promotion of domestic production or the creation of a people-oriented enterprise
is vital and will play a role in the future development of the Lao PDR industry.

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Cite this article:

Khampheng KINGKHAMBANG, Bounmy INTHAKESONE, Neevanh SAYNAVONG, Phoxay

PHANHONKEO, Phonexay CHANTHATHAB & Khaysy SRITHILAT (2023). Labor
Productivity analysis in Lao PDR Case study: Garment, Furniture and food-beverage industry.
International Journal of Science and Business, 21(1), 54-66. doi: https://doi.org/
10.58970/IJSB.20756

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