**Table 2 Wage Levels for Cambodia and Sri Lanka**

||**Cambodia**||||**Sri Lanka**|||
|---|---|---|---|---|---|---|---|
||**2004**|**2007**|**2008**|**2009**|**2002**|**2006**|**2008**|
|**Mean log wage in T&G**|12.24|12.45|12.53|12.45|8.35|8.75|8.86|
|**Mean log wage in agriculture**|11.05|11.6|11.72|11.61|7.82|8.31|8.68|
|**Mean log wage**|11.74|12.31|12.47|12.22|8.34|8.83|8.94|

_Source:_ Authors’ calculationsbased on Cambodia Socio-Economic Surveys and the Sri Lankan 2002 and 2006 Household Income and Expenditure Surveys and the 2002 and 2008 Labor Force Surveys _Note:_ T&G = textiles and garments.

Tables 3 and 4 present the results of wage regressions for Cambodia and Sri Lanka, respectively. The regression analysis was carried out using the methodology described in section 3.a. For our analysis, we used six rounds of the Cambodian Socio-Economic Surveys that covered the 1996–2009 period, the Sri Lankan 2002 and 2006 HIESs, and the 2002 and 2008 Sri Lankan Labor Force Surveys.

In both countries, working in apparel pays a positive premium compared to the economy average; however, the premium dipped immediately after the MFA phase-out. This result is in line with theoretical predictions that a decrease in price for apparel leads to a decline in the relative wages in apparel in the short term. In Cambodia, the wage premium for working in apparel was negative in 1996, most likely because the industry was just established and had operated for only three years. In 1999, the apparel wage premium increased significantly, coinciding with Cambodia signing trade agreements with the United States and the EU and significantly increasing its exports. The apparel wage premium declined considerably in 2004, compared to 1999. However, the premium went up over 2007–08.<sup>11</sup> Even though the apparel industry premium in Sri Lanka was lower than in Cambodia—in 2002, it was 0.196—the industry premium was still positive as compared to the economy average. The premium went down in 2006 to 0.05, but it increased to 0.08 in 2008. The increase in the apparel wage premium in 2008 might be associated with the industry switch to manufacturing higher-value goods, such as lingerie.

The change in the female relative wages represents the long run effect of the price shock. In both countries, the wage gap behaved in the manner predicted by the theory—it widened in the three to five years following the MFA phase-out, but then exhibited a declining pattern. In Cambodia the female wage gap decreased over time; in 1996 female wages were 26.6 percent lower than those of males, but in 2009 women were paid only 11.5 percent less than men (see table 3).<sup>12</sup> The wage gap went up after the MFA phase-out, from 12.0 to 13.3 percent over 2004– 08; however, it decreased in 2009 to 11.5 percent. The gender wage differential in Sri Lanka also increased after the end of the MFA. In 2002, women earned 40 percent less than men (see table

> 11Robertson,et al. (2009) also document a positive wage premium for the Cambodian apparel sector in 2004. 12More careful analysis of wage premiums from 2009 onward is needed for several reasons: 1) this is the time of financial crisis, and 2) the Chinese apparel safeguards were lifted at the end of 2008. Therefore, the changes in 2009 and after are influenced not only by the MFA phase-out, but by other events as well.

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