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Prospects for Skills-Based Export Growth in a Labour-Abundant, Resource-Rich Economy: Indonesia in Comparative Perspective

Author

Listed:
  • Coxhead, Ian

    (U of Wisconsin and Norwegian University of Life Sciences)

  • Li, Muqun

    (U of Wisconsin)

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 for labourintensive 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 total 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 higher had it achieved higher levels of FDI and skills. Indonesia's performance in accumulating these endowments, and its relative resource abundance, impede diversification in production and trade. Finally, we discuss policy lessons and options.

Suggested Citation

  • Coxhead, Ian & Li, Muqun, 2008. "Prospects for Skills-Based Export Growth in a Labour-Abundant, Resource-Rich Economy: Indonesia in Comparative Perspective," Staff Paper Series 524, University of Wisconsin, Agricultural and Applied Economics.
  • Handle: RePEc:ecl:wisagr:524
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    File URL: http://www.aae.wisc.edu/pubs/sps/pdf/stpap524.pdf
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    Cited by:

    1. Muqun Li & Ian Coxhead, 2011. "Trade and Inequality with Limited Labor Mobility: Theory and Evidence from China," Review of Development Economics, Wiley Blackwell, vol. 15(1), pages 48-65, February.
    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. Ian Coxhead & Rashesh Shrestha, 2016. "Could a Resource Export Boom Reduce Workers’ Earnings? The Labour-Market Channel in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 52(2), pages 185-208, May.
    4. Ian Coxhead & Sisira Jayasuriya, 2010. "China, India and the Commodity Boom: Economic and Environmental Implications for Low-income Countries," The World Economy, Wiley Blackwell, vol. 33(4), pages 525-551, April.
    5. 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.

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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