Scandinavian Working Papers in Economics

EIJS Working Paper Series,
Stockholm School of Economics, The European Institute of Japanese Studies

No 166: Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data

Robert E. Lipsey () and Fredrik Sjöholm ()
Additional contact information
Robert E. Lipsey: National Bureau of Economic Research, Postal: 365 Fifth Ave. Suite 5318, New York, NY 10016, USA
Fredrik Sjöholm: European Institute of Japanese Studies, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden

Abstract: Wages in domestically- owned Indonesian manufacturing plants taken over by foreign firms increased sharply between the year before takeover and two years after takeover, relative to plants remaining in domestic ownership. Blue- collar wage levels in these plants had been less than 10 per cent above and white- collar wages more than 10 per cent below those in their industries a year before takeover. Two years after takeover both were more than 50 per cent above average. Wages in foreign plants taken over by domestic owners tended to rise less than average for their industries, although they remained above the domestic average. Thus, foreign firms did not select particularly high- wage plants to take over and it was foreign takeovers, rather than takeovers in general, that led to large wage increases and high wages. An econometric analysis of the whole panel found 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. Foreign takeovers were associated with large increases in blue- collar employment and both foreign and domestic takeovers with declines in white- collar employment. However, the employment changes were not strongly related to the wage changes.

Keywords: FDI; Foreign ownership; Indonesia; Wages

JEL-codes: F23; J31; O12

26 pages, December 1, 2002

Full text files

eijswp0166.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Nanhee Lee ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:31:49.