IDEAS home Printed from https://ideas.repec.org/p/agi/wpaper/00000051.html
   My bibliography  Save this paper

Exporting, Education, and Wage Differentials between Foreign Multinationals and Local Plants in Indonesian and Malaysian Manufacturing

Author

Listed:
  • Ramstetter, Eric D.

Abstract

There is now substantial evidence that foreign multinational enterprises (MNEs) often pay higher wages than corresponding local plants. This paper extends this research by asking whether MNE-local wage differentials depend on whether a plant exports or not. Mean, unconditional, MNE-local wage differentials tended to be somewhat smaller for exporters than for non-exporters in large samples of 11 manufacturing industries of Malaysia in 2000-2004 (31 vs. 44 percent) and Indonesia in 2006 (58 vs. 74 percent), and the gap was particularly conspicuous for Indonesia in 1996 (89 vs. 220 percent). Conditional MNE-local wage differentials that account for the influences of worker education and sex, as well as plant size and capital or energy intensity, on plant-level wages, were smaller but positive and highly significant statistically. Conditional differentials were also smaller for exporters Indonesia in 1996 (24 vs. 32 percent), but larger for exporters in Indonesia in 2006 (12 vs. 5.7 percent) and Malaysia in 2000-2004 (8.8-9.2 vs . 6.2-7.5 percent in pooled OLS estimates and 7.2-7.8 vs. 4.7-6.7 percent in random effects estimates). However, when estimated at the industry level, conditional differentials and were often insignificant, especially for Indonesia in 2006, and industry-level differentials were not clearly related to export status.

Suggested Citation

  • 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.
    • Handle: RePEc:agi:wpaper:00000051
    as

    Download full text from publisher

    File URL: http://id.nii.ac.jp/1270/00000051/
    Download Restriction: no
    File URL: https://agi.repo.nii.ac.jp/?action=repository_action_common_download&item_id=70&item_no=1&attribute_id=22&file_no=1
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    2. Brian Aitken & Ann Harrison & Robert E. Lipsey, 2022. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 4, pages 61-87, World Scientific Publishing Co. Pte. Ltd..
    3. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
    4. Sjoholm, Fredrik & Lipsey, Robert E, 2006. "Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 201-221, October.
    5. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521860130.
    6. Losina Purnastuti & Paul W. Miller & Ruhul Salim, 2013. "Declining rates of return to education: evidence for Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 49(2), pages 213-236, August.
    7. Kitae Sohn, 2013. "Monetary and Nonmonetary Returns to Education in I ndonesia," The Developing Economies, Institute of Developing Economies, vol. 51(1), pages 34-59, March.
    8. Theodore H. Moran, 2001. "Parental Supervision: The New Paradigm for Foreign Direct Investment and Development," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa64, October.
    9. David Greenaway & Richard Kneller, 2007. "Firm heterogeneity, exporting and foreign direct investment," Economic Journal, Royal Economic Society, vol. 117(517), pages 134-161, February.
    10. Branko Milanovic, 2006. "Inequality and Determinants of Earnings in Malaysia, 1984–1997," Asian Economic Journal, East Asian Economic Association, vol. 20(2), pages 191-216, June.
    11. Hal Hill, 2000. "Indonesia: The Strange and Sudden Death of a Tiger Economy," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 117-139.
    12. 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.
    13. Mark Casson, 1987. "The Firm and the Market: Studies on the Multinational Enterprise and the Scope of the Firm," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031299, December.
    14. Theodore H. Moran & Edward M. Graham & Magnus Blomstrom, 2005. "Does Foreign Direct Investment Promote Development?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 3810, October.
    15. 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.
    16. Athukorala, Prema-chandra & Devadason, Evelyn S., 2012. "The Impact of Foreign Labor on Host Country Wages: The Experience of a Southern Host, Malaysia," World Development, Elsevier, vol. 40(8), pages 1497-1510.
    17. Schafgans, Marcia M. A., 2000. "Gender wage differences in Malaysia: parametric and semiparametric estimation," Journal of Development Economics, Elsevier, vol. 63(2), pages 351-378, December.
    18. World Bank, 2014. "World Development Indicators 2014," World Bank Publications - Books, The World Bank Group, number 18237, December.
    19. Lim, David, 1977. "Do foreign companies pay higher wages than their local counterparts in Malaysian manufacturing?," Journal of Development Economics, Elsevier, vol. 4(1), pages 55-66, February.
    20. Fredrik Sjöholm, 2003. "Which Indonesian firms export? The importance of foreign networks," Papers in Regional Science, Springer;Regional Science Association International, vol. 82(3), pages 333-350, September.
    21. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, number 9780521677530.
    22. Sjoholm, Fredrik & Lipsey, Robert E, 2006. "Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 201-221, October.
    23. Hill,Hal, 2000. "The Indonesian Economy," Cambridge Books, Cambridge University Press, number 9780521663670.
    24. Alan Rugman, 1980. "Internalization as a general theory of foreign direct investment: A re-appraisal of the literature," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(2), pages 365-379, June.
    25. Robert Lipsey & Fredrik Sjöholm, 2004. "FDI and wage spillovers in Indonesian manufacturing," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(2), pages 321-332, June.
    26. Eric D. Ramstetter & Sadayuki Takii, 2006. "Exporting and Foreign Ownership in Indonesian Manufacturing, 1990-2000," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 54, pages 315-343, December.
    27. Viktor Pirmana, 2006. "Earnings Differential Between Male-Female In Indonesia: Evidence From Sakernas Data," Working Papers in Economics and Development Studies (WoPEDS) 200608, Department of Economics, Padjadjaran University, revised Aug 2006.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. Ramstetter, Eric D., 2018. "Foreign Multinationals and Vietnamese Firm Exports, 2010-2013," AGI Working Paper Series 2018-04, Asian Growth Research Institute.
    6. Ramstetter, Eric D., 2017. "How important are SOEs and MNEs in Vietnam’s economy?," AGI Working Paper Series 2017-09, Asian Growth Research Institute.
    7. 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.
    8. Ramstetter, Eric D. & Ngoc, Phan Minh, 2013. "Productivity, ownership, and producer concentration in transition: Further evidence from Vietnamese manufacturing," Journal of Asian Economics, Elsevier, vol. 25(C), pages 28-42.
    9. Elisa Giuliani & Chiara Macchi, 2014. "Multinational corporations’ economic and human rights impacts on developing countries: a review and research agenda," Cambridge Journal of Economics, Oxford University Press, vol. 38(2), pages 479-517.
    10. Ding, Ding, 2015. "Leaning from multinational companies through hiring: An empirical investigation," Working Paper Series in Economics and Institutions of Innovation 402, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    11. María C. Latorre, 2009. "The economic analysis of multinationals and foreign direct investment: a review," Hacienda Pública Española / Review of Public Economics, IEF, vol. 191(4), pages 97-126, December.
    12. 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.
    13. Ramstetter, Eric D. & Narjoko, Dionisius, 2013. "Foreign Ownership, State Ownership and Energy Efficiency in Indonesia's Private Manufacturing Plants," AGI Working Paper Series 2013-17, Asian Growth Research Institute.
    14. Andrzej Cieślik, 2015. "Imperfect competition, productivity differences and proximity concentration trade-offs," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 40.
    15. Ramstetter, Eric D. & Kohpaiboon, Archanun, 2013. "Foreign Ownership and Energy Efficiency in Thailand’s Local Manufacturing Plants," AGI Working Paper Series 2013-15, Asian Growth Research Institute.
    16. Maria Borga & Perla Ibarlucea Flores & Monika Sztajerowska, 2020. "Drivers of divestment decisions of multinational enterprises - A cross-country firm-level perspective," OECD Working Papers on International Investment 2019/03, OECD Publishing.
    17. Andrzej Cieślik & Michael Ryan, 2012. "Productivity Differences and Foreign Market Entry in an Oligopolistic Industry," Open Economies Review, Springer, vol. 23(3), pages 531-557, July.
    18. Ramstetter, Eric D., 2016. "Foreign Workers, Foreign Multinationals, and Wages by Occupation and Sex in Malaysia’s Manufacturing Plants during the mid-1990s," AGI Working Paper Series 2016-23, Asian Growth Research Institute.
    19. Nguyen, Dao Thi Hong, 2019. "Inward foreign direct investment and local wages: The case of Vietnam’s wholesale and retail industry," Journal of Asian Economics, Elsevier, vol. 65(C).
    20. Fabian Barthel & Matthias Busse & Robert Osei, 2011. "The Characteristics and Determinants of FDI in Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 23(3), pages 389-408, July.

    More about this item

    Keywords

    Multinationalcorporations; SoutheastAsia; manufacturing; wagedetermination;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:agi:wpaper:00000051. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kazuki Tamura (email available below). General contact details of provider: https://edirc.repec.org/data/icseajp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.