FOREIGN DIRECT INVESTMENT AND WAGE SPILLOVERS IN THE INDONESIAN MANUFACTURING INDUSTRY

Title : FOREIGN DIRECT INVESTMENT AND WAGE SPILLOVERS IN THE INDONESIAN MANUFACTURING INDUSTRY

Authors :
1. Mohammad Zeqi Yasin
2. Miguel Angel Esquivias
3. Nur Arifin

Department : Ilmu Ekonomi

Journal Name : Buletin Ekonomi Moneter dan Perbankan

Kinds of Journal : Sinta 1

Keywords : FDI, Wage Spillovers, Manufacturing Industry, Indonesia

ABSTRACT

We examine whether foreign direct investment (FDI) influences wage spillover in the manufacturing sector in Indonesia from the perspective of three recipients (dimensions): industry, province, and technology intensity. Annual data of Indonesian manufacturing firms from 2011 to 2015 is employed. Using the Fixed Effect Model, we found the spatial (province) dimension to matter the most as it consistently indicates that inward FDI depresses wages in the recipient province. When we split the observation based on firm size, FDI inflows within the same technological intensive subsectors were found to discourage wages. Only FDI inflows within the host industries support higher salaries for smaller domestic firms. The coordination between central and local governments remains essential to ensure that local companies are sufficiently competitive with foreign companies.

For details : https://www.bmeb-bi.org/index.php/BEMP/article/view/1821