# Introduction

Understanding mechanisms to improve working conditions in GVCs is a policy priority for governments in both producing and outsourcing countries, both from a social and economic point of view. Working conditions often fall short of international standards in producing countries. At the same time, a growing number of studies show that better working conditions are positively associated with improvements in profits, productivity, and firm survival (World Bank 2015).

Labor and social standards for firms in GVCs have been introduced in countries to address poor working conditions, but their effectiveness is not fully evident. Moreover, there is limited availability of firm‐level evidence about factors that facilitate increased compliance with labor and social standards. This paper helps fill this gap by strengthening the micro‐level analysis of firms' compliance with labor standards in Vietnam’s apparel sector through one possible policy measure: transparency. The findings support evidence‐based policy making.

This research leverages factory‐level data from the ILO‐IFC Better Work Vietnam program to assess the relationship between transparency of working conditions and firm compliance with labor standards in Vietnam. It exploits a change in the policies of Better Work Vietnam when, in 2015, the launch of a new Public Disclosure Programme was announced that will make factories’ names publicly available along with their compliance (or lack thereof) with certain “critical issues”. These critical issues include compliance clusters around discrimination, child labor, minimum wage payments, and various aspects of safety and health in the workplace. The primary objective of the Public Disclosure Programme is to accelerate the pace of improvements across the industry, thus raising worker well‐being and the industry’s reputation for ethical standards (Better Work Vietnam 2015).

We test whether changes in the transparency mechanism through public disclosure in GVCs changes firms’ adoption of better practices regarding working conditions. Specifically, the key question around compliance with labor standards in Vietnam that the paper addresses is:

- _Is there evidence that transparency through the Public Disclosure Programme accelerates adoption of compliance requirements? Does this vary by firm characteristics or compliance cluster?_ We test whether firms’ compliance with labor standards increases after the announcement and/or launch of the Public Disclosure Programme. We then test whether these results vary by firm characteristic or compliance cluster.

The effect of firm participation in monitoring and training programs on compliance has been more widely studied, in particular ILO‐IFC Better Factories or Better Work programs, focused largely on Cambodia. We also test whether overall results of the impact of program participation on compliance holds for Vietnam. This helps us to identify the effect of the disclosure policy specifically, rather than program participation generally. In doing so, we address three additional questions:

- _Are there certain characteristics of firms that do not meet compliance requirements?_ We test if firms of different size or age are less likely to comply with certain types of compliance clusters (including child labor, contracts, discrimination, forced labor, freedom of association, occupational health and safety, and work time).

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