Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 348: FDI and the Dynamics of Productivity: Microeconomic Evidence

Yumiko Okamoto and Fredrik Sjöholm ()
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Yumiko Okamoto: Department of Economics, GSID, Nagoya University, Postal: Furocho, Chikusa-ku, Nagoya, Japan 464-8601,
Fredrik Sjöholm: The European Institute of Japanese Studies, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden

Abstract: This paper examines productivity growth in the Indonesian manufacturing sector. We use a longitudinal data set to calculate the effects on aggregate manufacturing productivity growth from improvements within establishments, from reallocation of market shares, and from the turnover of plants. The difference between domestic and foreign owned plants is examined together with a calculation of the foreign owned plants' contribution to overall productivity growth. Productivity growth is mainly explained by reallocation of market shares and from turnover of plants. In addition, we find foreign plants to contribute significantly to overall productivity growth and there is a difference in the causes to productivity growth between foreign and domestic plants.

Keywords: Productivity growth; Plants; Turnover; Manufacturing; Indonesia

JEL-codes: D24; F23; O53

32 pages, December 2, 1999

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