Foreign Firms and Indonesian Manufacturing Wages: An Analysis With Panel Data

Robert E. Lipsey, Fredrik Sjoholm

NBER Working Paper No. 9417
Issued in January 2003, Revised in June 2006
NBER Program(s):International Trade and Investment, Productivity, Innovation, and Entrepreneurship

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 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.

download in pdf format
   (155 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w9417

Published: Sjoholm, Fredrik & Lipsey, Robert E, 2006. "Foreign Firms and Indonesian Manufacturing Wages: An Analysis with Panel Data," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 201-21, October. citation courtesy of

Users who downloaded this paper also downloaded* these:
Lipsey, Sjoholm, and Sun w15936 Foreign Ownership and Employment Growth in Indonesian Manufacturing
Lipsey and Sjoholm w8299 Foreign Direct Investment and Wages in Indonesian Manufacturing
Aitken, Harrison, and Lipsey w5102 Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela and the United States
Lipsey Home- and Host-Country Effects of Foreign Direct Investment
Lipsey w9293 Home and Host Country Effects of FDI
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us