TY - JOUR
T1 - FOREIGN DIRECT INVESTMENT AND WAGE SPILLOVERS IN THE INDONESIAN MANUFACTURING INDUSTRY
AU - Yasin, Mohammad Zeqi
AU - Esquivias, Miguel Angel
AU - Arifin, Nur
N1 - Publisher Copyright:
© 2022 by the authors.
PY - 2022
Y1 - 2022
N2 - 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 technology intensive subsectors were found to discourage wages. Only FDI inflows within the host industries support higher salaries for smaller domestic firms and gains in labour productivity. The coordination between central and local governments remains essential to ensure that local companies are sufficiently competitive with foreign companies.
AB - 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 technology intensive subsectors were found to discourage wages. Only FDI inflows within the host industries support higher salaries for smaller domestic firms and gains in labour productivity. The coordination between central and local governments remains essential to ensure that local companies are sufficiently competitive with foreign companies.
KW - FDI
KW - Indonesia
KW - Manufacturing industry
KW - Wage Spillover
UR - http://www.scopus.com/inward/record.url?scp=85128415066&partnerID=8YFLogxK
U2 - 10.21098/bemp.v25i0.1821
DO - 10.21098/bemp.v25i0.1821
M3 - Article
AN - SCOPUS:85128415066
SN - 1410-8046
VL - 25
SP - 125
EP - 160
JO - Buletin Ekonomi Moneter dan Perbankan
JF - Buletin Ekonomi Moneter dan Perbankan
ER -
