Working Paper Series
Foreign Direct Investment and Value Added in Indonesia
Abstract: Foreign Direct Investment (FDI) has increased in
importance over the last decades, globally as well as in Indonesia. We
examine how such inflows of FDI affects value added in Indonesia. The
effect is positive: foreign firms generate relatively high levels of value
added and they also seem to have a positive impact on value added in local
firms. Moreover, FDI contribute to a structural change of the economy
towards more high-value added activities. High value added could lead to
increased investments and higher tax revenues for the government. High
value added could also benefit labor through higher wages, an effect that
is empirically confirmed in Indonesia.
Keywords: Foreign Direct Investment; Multinational Firms; Value Added; Industrial Development; (follow links to similar papers)
JEL-Codes: F23; F61; F63; (follow links to similar papers)
35 pages, November 22, 2016
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