Buyers’ Sourcing Strategies and Working Conditions in Bangladeshi Garments

Abstract

We study whether and how international buyers influence working conditions in developing-country suppliers, focusing on the Bangladesh garment sector. Combining transaction-level customs data, factory safety audits, ILO compliance assessments, worker surveys, and an original COVID-19 establishment survey, we distinguish between relational buyers—who concentrate orders among long-term partners—and spot buyers who prioritize flexibility. Cross-sectionally, suppliers of relational buyers exhibit significantly better compliance with labor standards. To establish causality, we implement a matched difference-in-differences design exploiting the timing of exporters' first transactions with relational buyers. Exposure to relational buyers increases safety remediation by 14 percentage points relative to a control mean of 41 percent. Investigating mechanisms, we find that reputational pressures do not explain the relationship: conditional on sourcing volumes, NGO campaign exposure does not predict relationality, and relational buyers were no more likely to join voluntary safety initiatives post-Rana Plaza. Evidence from COVID-19 supports an alternative explanation: relational buyers provided more concessions during the crisis, reducing worker layoffs. Our findings suggest that commercial features of relational contracting—stable relationships, honored commitments—functionally complement safer working conditions, independent of reputational concerns.