Towards a methodology for poverty and social
impact assessment of cluster development initiatives
This study addresses the relationship between industrial clusters and
poverty. This is a relatively underdeveloped theme within policy research
on clusters. The focus on poverty is driven by contemporary concerns on
poverty targeting in development assistance. The study also seeks to develop
a methodology to conduct poverty and social impact analysis of cluster
Industrial clusters, or geographical concentration of firms and ancillary
units engaged in the same sector, can generate various advantages for
small firms, from agglomeration economies to joint action benefits. The
cluster model emphasises internal linkages, whereby cluster gains are
furthered by local firm cooperation, local institutions and local social
capital. The growing evidence on small firm clusters in developing countries
competing in local and global markets has driven much of the policy enthusiasm
on promoting clusters.
External linkages also matter, global buyers can help local clusters access
distant markets, acquire new forms of knowledge and upgrade. The nature
of governance in the relationship that local clustered firms have with
buyers in global value chains is critical to this, determin-ing the autonomy
and power of local actors. The value chain methodology helps map how local
clusters are inserted into global value chains. It also provides a basis
for charting the link to poverty by mapping “poverty nodes”.
Industrial clusters lend themselves to poverty concerns both directly
- through employment, incomes and well-being generated for the working
poor, and indirectly, through their wider impacts on the local economy.
Conceptually, clusters and poverty are related in three distinct ways.
Through cluster features, cluster processes, and cluster dynamics. Certain
types of clusters may have a more direct impact on poverty. These include
clusters in rural areas and in the urban informal economy, clusters that
have a preponderance of SMEs, micro-enterprises and homeworkers, clusters
in labour intensive sectors and clusters that employ women, migrants and
unskilled labour. Agglomeration economies reduce costs and raise the capabilities
of workers and producers. Cluster joint action takes such capabilities
further, strengthening capacity of local firms and reducing vulnerability
to external shocks. But, cluster growth produce winners and losers amongst
firms and workers. For a poverty agenda, it is critical to note which
types of firms and workers gain over time and which lose.
Few cluster studies have explicitly addressed poverty concerns. A review
of existing evidence underlines the relationship between clusters and
poverty. There is substantial evidence that clusters generate employment
and incomes for the poor in the developing world, and on their growth
dynamics. It is in the more advanced clusters, that evolved from poorer
inci-pient clusters, that employment growth is most substantial. The limited
evidence on counter-factuals suggests a relationship between clustering
and gains in employment and incomes.
In incipient clusters, small producers advance by taking small riskable
steps in coordination with others in the cluster. This allows small producers
and workers to survive and to grow, thus raising their income and well-being.
We observe that this can be accelerated by the gains that clustering brings
about. Local agglomeration economies are central to growth, as well as
to the income and well-being of those engaged in incipient and mature
clusters from rural Indonesia to the urban informal sector of Lima, to
the export clusters of Mexico and Brazil and India. Joint action is also
important, especially in the context of assisting local producers
and workers to confront external shocks as seen in Sialkot, Pakistan and
the Palar Valley, India. There is evidence that social capital can contribute
to strengthening cluster capacities and the well-being of local workers
It is evident that growth results in differentiated outcomes. Local linkages
can give way to external linkages. Conflicts between the competing interests
of large and small firms become more apparent. There are clear signs that
particular categories of workers, especially women and unskilled workers,
often lose out as clusters upgrade.
In order to further our understanding of the effects of cluster development
programmes (CDP) on poverty, it is necessary to develop a methodology
for poverty and social impact assessment for CDP. This paper combines
a value chain mapping and capabilities approach to do so, arguing that
the impact assessment perspective adopted should be one that is designed
as a means of improving impact.
A value chain mapping of clusters helps identify links between key cluster
stakeholders, both entrepreneurs and workers, and cluster institutions.
Poverty profiling helps identify the main “poverty nodes” where poorer
groups are located within the cluster. Further disaggregation facilitates
poverty impact assessment of different categories of firms and workers,
and iden-tify differences in poverty impacts based on gender, ethnicity
The paper develops a methodology for impact assessment of poor groups
within clusters drawing on a capability approach, in order to assess how
the well-being of poorer groups identified in the mapping is affected.
This draws on a mix of quantitative, qualitative and participatory methods.
It examines ways in which a baseline can be constructed, and the issues
involved in establishing a “comparator group” through which the differential
impact of cluster programmes on poverty can be assessed. Finally, it considers
how this can be embedded within cluster programmes as part of an ongoing
These findings stress the need for policy interventions. Policies aimed
at supporting margin-alized producers and workers. Such policies need
to identify the capability deprivation of poor workers and entrepreneurs
and identify how their well-being could be enhanced. A policy agenda on
clusters and poverty needs to have, as a starting point, a method for
ex-ante identifying clusters where poverty concerns may be especially
valid. The discussion on the relationship between poverty reduction and
specific cluster features, cluster processes and cluster dynamics provides
us with a basis for mapping clusters and poverty.
Cluster development initiatives need to distinguish between incipient
clusters where poverty incidence is high, and growth engine clusters that
can generate incomes both directly and indirectly for the poor, and have
strong local institutions that strengthen the ability of clus-tered actors
to engage in pro-poor collective action. Thus, a pro-poor policy agenda
needs to be engaged at two levels. First, the tweaking of existing cluster
policy initiatives to make them more effective for a pro-poor agenda -
such as poverty targeting, training, and micro-credit provisioning. Second,
concentrating on particular areas where cluster development pro-grammes
have often tended to ignore. These include, in particular, labour and
ethical standards, conditions of work, and health and safety issues.
The study underlines the need for further research, in terms of comparing
poverty impacts across a range of distinct types of clusters, from mature
clusters to incipient urban informal clusters to rural clusters. It also
calls for the effective inclusion of poverty and social impact assessment
within cluster development programmes as part of on-going agenda of improving
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