Wages in domestically- owned Indonesian manufacturing plants taken over by foreign firms increased sharply between the year before takeover and two years after takeover, relative to plants remaining in domestic ownership. Blue- collar wage levels in these plants had been less than 10 per cent above and white- collar wages more than 10 per cent below those in their industries a year before takeover. Two years after takeover both were more than 50 per cent above average. Wages in foreign plants taken over by domestic owners tended to rise less than average for their industries, although they remained above the domestic average. Thus, foreign firms did not select particularly high- wage plants to take over and it was foreign takeovers, rather than takeovers in general, that led to large wage increases and high wages. An econometric analysis of the whole panel found that both foreign ownership throughout the period and foreign takeover resulted in higher wages relative to domestically- owned plants. The wage effects for white- collar employees were typically around twice those for blue- collar employees. Foreign takeovers were associated with large increases in blue- collar employment and both foreign and domestic takeovers with declines in white- collar employment. However, the employment changes were not strongly related to the wage changes.
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Paper provided by The European Institute of Japanese Studies in its series EIJS Working Paper Series with number
166.
Length: 26 pages Date of creation: 01 Dec 2002 Date of revision: Publication status: Published in Economic Development and Cultural Change, 2006, pages 201-221. Handle: RePEc:hhs:eijswp:0166
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Find related papers by 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 O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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