Skip to main content
SpringerLink
Log in

FDI and wage spillovers in Indonesian manufacturing

  • Shorter Paper
  • Published:
Review of World Economics Aims and scope Submit manuscript

Abstract

This paper examines the effect of foreign direct investment in Indonesian manufacturing on wages in locally owned Indonesian manufacturing plants. The issue is examined in a cross section of Indonesian manufacturing industries and provinces in one of the few years for which data on worker characteristics were available. Wages in locally owned plants were high in industries and industries within provinces with large foreign presence. Since the foreign plants also pay higher wages than locally owned ones, the two factors together imply that higher foreign presence raises the general wage level in a province and industry. JEL no. F2, J3

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

References

  • Aitken, B. J., and A. E. Harrison (1999). Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela.American Economic Review 89 (3): 605–618.

    Article  Google Scholar 

  • Aitken, B. J., A. E. Harrison, and R. E. Lipsey (1996). Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States.Journal of International Economics 40 (3): 345–371.

    Article  Google Scholar 

  • Blomström, M., and F. Sjöholm (1999). Technology Transfer and Spillovers: Does Local Participation with Multinationals Matter?European Economic Review 43 (4/6): 915–923.

    Article  Google Scholar 

  • Driffield, N., and S. Girma (2003). Regional Foreign Direct Investment and Wage Spillovers: Plant Level Evidence from the UK Electronics Industry.Oxford Bulletin of Economics and Statistics 65 (4): 453–474.

    Article  Google Scholar 

  • Feliciano, Z., and R. E. Lipsey (1999). Foreign Ownership and Wages in the United States, 1987–1992. NBER Working Paper 6923. NBER, Cambridge, Mass.

    Google Scholar 

  • Figlio, D. N., and B. Blonigen (2000). The Effects of Foreign Direct Investment on Local Communities.Journal of Urban Economics 48 (2): 338–363.

    Article  Google Scholar 

  • Görg, H., and D. Greenaway (2002). Much Ado About Nothing? Do Domestic Firms Really Benefit From Foreign Direct Investment? CEPR Discussion Paper 3485. CERP, London.

    Google Scholar 

  • Guillouet, A. (1990).Booming Economies of Southeast Asia. Singapore: Longman.

    Google Scholar 

  • Hill, H. (1990). Indonesia's Industrial Transformation Part II.Bulletin of Indonesian Economic Studies 26 (2): 75–109.

    Article  Google Scholar 

  • Lipsey, R. E. (2004). Home and Host Country Effects of FDI. In R. E. Baldwin and L. A. Winters (eds.),Challenges to Globalization. Chicago: University of Chicago Press.

    Google Scholar 

  • Lipsey, R. E., and F. Sjöholm (2004). Foreign Direct Investment, Education, and Wages in Indonesian Manufacturing.Journal of Development Economics 73 (1): 415–422.

    Article  Google Scholar 

  • Manning, C. (1993). Structural Change and Industrial Relations during the Suharto Period: An Approaching Crisis?.Bulletin of Indonesian Economic Studies 29 (2): 51–95.

    Article  Google Scholar 

  • Manning, C. (1998).Indonesian Labour in Transition: An East Asian Success Story? Cambridge: Cambridge University Press.

    Google Scholar 

  • Manning, C., and P. E. Fong (1990). Labour Market Trends and Structures in ASEAN and the East Asian NIEs.Asian-Pacific Economic Literature 4 (2): 59–81.

    Article  Google Scholar 

  • Pangestu, M. (1997). Indonesia: Trade and Foreign Investment Linkages. In W. Dobson and C. S. Yue (eds.).Multinationals and East Asian Integration. Singapore: Institute of Southeast Asian Studies.

    Google Scholar 

  • Sjöholm, F. (1999a). Productivity Growth in Indonesia: The Role of Regional Characteristics and Direct Foreign Investment.Economic Development and Cultural Change 47 (3): 559–584.

    Article  Google Scholar 

  • Sjöholm, F. (1999b). Technology Gap, Competition and Spillovers from Direct Foreign Investment: Evidence from Establishment Data.Journal of Development Studies 36 (1): 53–73.

    Google Scholar 

  • Thee, K. W., and M. Pangestu (1998). Technological Capability in Manufactured Exports from Indonesia. In D. Ernst, T. Ganiatsos, and L. Krieger Mytelka (eds.).Technological Capability in manufactured Exports in Asia. London: Routledge.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. City University of New York, New York, USA

    Robert E. Lipsey & Fredrik Sjöholm

  2. Stockholm School of Economics, P.O. Box 6501, S-113 83, Stockholm

    Robert E. Lipsey & Fredrik Sjöholm

Authors
  1. Robert E. Lipsey
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Fredrik Sjöholm
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Fredrik Sjöholm.

Additional information

This paper was prepared as part of an ICSEAD project on “Foreign Multinational Corporations and Host-Country Labor Markets in Asia”. Earlier versions appeared as ICSEAD Working Paper 2001–02 and NBER Working Paper No. 8299.

About this article

Cite this article

Lipsey, R.E., Sjöholm, F. FDI and wage spillovers in Indonesian manufacturing. Rev. World Econ. 140, 321–332 (2004). https://doi.org/10.1007/BF02663651

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF02663651

Keywords

Search

Navigation