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Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data

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  • Sjoholm, Fredrik
  • Lipsey, Robert E

Abstract

This article examines the effect of foreign direct investment (FDI) on wages in Indonesian manufacturing. An econometric analysis of a panel of plants between 1975 and 1999 finds 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. The effect of foreign ownership on wages differed among sectors but was always positive.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:ecdecc:y:2006:v:55:i:1:p:201-221
    DOI: 10.1086/505723
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    References listed on IDEAS

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    1. Manning,Chris, 1998. "Indonesian Labour in Transition," Cambridge Books, Cambridge University Press, number 9780521594127, October.
    2. Robert E. Lipsey & Fredrik Sjoholm, 2001. "Foreign Direct Investment and Wages in Indonesian Manufacturing," NBER Working Papers 8299, National Bureau of Economic Research, Inc.
    3. Mark E. Doms & J . Bradford Jensen, 1998. "Comparing Wages, Skills, and Productivity between Domestically and Foreign-Owned Manufacturing Establishments in the United States," NBER Chapters, in: Geography and Ownership as Bases for Economic Accounting, pages 235-258, National Bureau of Economic Research, Inc.
    4. Huizinga, Harry, 1990. "Unions, taxes and the structure of multinational enterprises," Economics Letters, Elsevier, vol. 34(1), pages 73-75, September.
    5. Aitken, Brian & Harrison, Ann & Lipsey, Robert E., 1996. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," Journal of International Economics, Elsevier, vol. 40(3-4), pages 345-371, May.
    6. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
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    More about this item

    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, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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