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Prospects for Skills-based Export Growth in a Labor-abundant, Resource-rich Developing Economy

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  • Ian Coxhead
  • Muqun Li

Abstract

In an integrated global economy, specialisation in trade is an increasingly prominent strategy. A labour-abundant, resource-rich economy like Indonesia faces stiff competition in labour-intensive manufactures; meanwhile, rapid growth in demand for resources from China and India exposes it to the 'curse' of resource wealth. This diminishes prospects for more diversified growth based on renewable resources like human capital. Using an international panel data set we explore the influence of resource wealth, foreign direct investment and human capital on the share of skill-intensive products in exports. FDI and human capital increase this share; resource wealth diminishes it. We use the results to compare Indonesia with Thailand and Malaysia. Indonesia's reliance on skill-intensive exports would have been greater had it achieved higher levels of FDI and skills. Its performance in accumulating these endowments, and its relative resource abundance, impede diversification in production and trade. We present policy options flowing from these findings.
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Suggested Citation

  • Ian Coxhead & Muqun Li, 2008. "Prospects for Skills-based Export Growth in a Labor-abundant, Resource-rich Developing Economy," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 63(04), pages 391-429, December.
    • Handle: RePEc:usg:auswrt:2008:63:04:391-429
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    1. Mr. Carlos A Leite & Jens Weidmann, 1999. "Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth," IMF Working Papers 1999/085, International Monetary Fund.
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    Cited by:

    1. Coxhead, Ian & Jayasuriya, Sisira, 2008. "The Rise of China and India and the Commodity Boom: Economic and Environmental Implications for Low-Income Countries," Staff Paper Series 528, University of Wisconsin, Agricultural and Applied Economics.
    2. Athukorala, Prema-chandra & Yamashita, Nobuaki, 2006. "Production fragmentation and trade integration: East Asia in a global context," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 233-256, December.
    3. Liang, Huijun & Shi, Changkuan & Abid, Nabila & Yu, Yanliang, 2023. "Are digitalization and human development discarding the resource curse in emerging economies?," Resources Policy, Elsevier, vol. 85(PB).

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    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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