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Wage Differentials between Foreign Multinationals and Local Plants and Worker Quality in Malaysian Manufacturing

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  • Eric D. Ramstetter

    (Research Professor, International Centre for the Study of East Asian Development and visiting professor at the Graduate School of Economics, Kyushu University)

Abstract

Using industrial census data for 2000, and smaller sets of survey data for 2001–2004, this paper examines the extent of wage differentials between medium-large (20 or more workers) foreign multinational enterprises (MNEs) and local plants in Malaysia's manufacturing industries. On average, wages in sample MNEs were higher than in local plants by two-fifths or more. In addition to being more capital-intensive and relatively large, MNEs also hired higher shares of workers in highly paid occupations and with moderate or high education. Results from large samples of 17 manufacturing industries combined suggest that statistically significant MNE–local differentials of 5%–9% persisted even after accounting for differences in worker occupation, education, and sex, plant capital intensity and size, as well as the influences of yearly fluctuations, industry affiliation, and plant location on the constants estimated. When MNE–local differentials and all slopes are allowed to vary among the 17 industries, positive and significant differentials were observed in all estimates for six industries: food and beverages, chemicals, rubber, general machinery, electrical machinery, and furniture. Positive and significant differentials were also observed in most estimates for another five industries. However, the size and significance of these differentials often varied depending on the industry and sample examined, as well as the estimation technique used. © 2013 Asian Development Bank and Asian Development Bank Institute.

Suggested Citation

  • Eric D. Ramstetter, 2014. "Wage Differentials between Foreign Multinationals and Local Plants and Worker Quality in Malaysian Manufacturing," Asian Development Review, MIT Press, vol. 31(2), pages 55-76, September.
    • Handle: RePEc:tpr:adbadr:v:31:y:2014:i:2:p:55-76
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    References listed on IDEAS

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    1. Eric D. Ramstetter, 2014. "Wage Differentials between Foreign Multinationals and Local Plants and Worker Quality in Malaysian Manufacturing," Asian Development Review, MIT Press, vol. 31(2), pages 55-76, September.
    2. Ramstetter, Eric D., 2014. "Exporting, Education, and Wage Differentials between Foreign Multinationals and Local Plants in Indonesian and Malaysian Manufacturing," AGI Working Paper Series 2014-03, Asian Growth Research Institute.
    3. Kien Trung Nguyen & Eric D. Ramstetter, 2017. "Wage Differentials among Ownership Groups and Worker Quality in Vietnamese Manufacturing," Global Economic Review, Taylor & Francis Journals, vol. 46(3), pages 232-250, July.
    4. Ramstetter, Eric D., 2018. "Foreign Multinationals and Vietnamese Firm Exports, 2010-2013," AGI Working Paper Series 2018-04, Asian Growth Research Institute.
    5. Ramstetter, Eric D., 2016. "Multinational Enterprise Growth and Vietnam's Employment and Wages in Manufacturing and Trade Industries: Did Takeovers Play a Role?," AGI Working Paper Series 2016-05, Asian Growth Research Institute.
    6. Ramstetter, Eric D., 2017. "Foreign Workers, Foreign Multinationals, and Wages after Controlling for Occupation and Sex in Malaysia’s Manufacturing Plants during the mid-1990s," AGI Working Paper Series 2017-13, Asian Growth Research Institute.
    7. Ramstetter, Eric D., 2017. "How important are SOEs and MNEs in Vietnam’s economy?," AGI Working Paper Series 2017-09, Asian Growth Research Institute.
    8. Kien Trung Nguyen & Eric D. Ramstetter, 2019. "Ownership-Related Wage Differentials By Occupation In Vietnamese Manufacturing," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(03), pages 625-645, June.
    9. Ramstetter, Eric D., 2018. "Foreign Ownership and Exports of Thai Manufacturing Plants by Industry in 1996," AGI Working Paper Series 2018-05, Asian Growth Research Institute.
    10. Ramstetter, Eric D. & Narjoko, Dionisius, 2013. "Wage Differentials between Foreign Multinationals and Local Plants and Worker Education in Indonesian Manufacturing," AGI Working Paper Series 2013-23, Asian Growth Research Institute.
    11. Thuyen, Truong Thi Ngoc & Jongwanich, Juthathip & Ramstetter, Eric D., 2017. "Trade protection and productivity differentials between multinationals and local firms in Vietnamese manufacturing," AGI Working Paper Series 2017-01, Asian Growth Research Institute.
    12. Eric D. , Ramstetter, 2016. "Experiences with Foreign Workers in Singapore and Malaysia: What are the Lessons for Japan's Labor Markets?," AGI Working Paper Series 2016-06, Asian Growth Research Institute.

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    More about this item

    Keywords

    wage differentials; education; MNEs;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • I20 - Health, Education, and Welfare - - Education - - - General

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