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Fdi Spillovers And Wage Gaps In Indonesia

Author

Listed:
  • Mohammad Zeqi Yasin

    (University of Jember, Indonesia)

  • Pyan Putro Surya Amin Muchtar

    (Australian National University)

  • Nur Arifin

    (BPS-Statistics Indonesia)

Abstract

Our objective is to evaluate the competitiveness of local firms by determining whether the dynamic wage spillover model devised by Tomohara and Takii (2011) consistently captures subsectoral dynamics. We identify two subsectors that are witnessing positive spillovers using the Indonesian firm-level dataset. Nevertheless, our quantitative analysis demonstrates inconsistencies, with competitive subsectors contributing to wage disparities at a higher rate than uncompetitive firms. In other words, wage inequalities between foreign and local firms are not effectively reduced by competitive firms. In order to improve the performance of local firms and enable them to more effectively compete with foreign firms in labor markets, international trade policies should incorporate social and labor support, such as advanced skills training and education.

Suggested Citation

  • Mohammad Zeqi Yasin & Pyan Putro Surya Amin Muchtar & Nur Arifin, 2025. "Fdi Spillovers And Wage Gaps In Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 28(1), pages 145-170, April.
    • Handle: RePEc:idn:journl:v:28:y:2025:i:1g:p:145-170
    DOI: https://doi.org/10.59091/2460-9196.1977
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    More about this item

    Keywords

    FDI spillovers; Wage; Manufacturing industry; Indonesia;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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