The Effect of FDI on Indonesia’s Jobs, Wages, and Structural Transformation
Foreign direct investment (FDI) can provide important opportunities for middle-class jobs by stimulating employment growth, paying wage premiums, and helping to shift workers out of less productive sectors. This analysis exploits regional variation...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/912131629434571756/The-Effect-of-FDI-on-Indonesia-s-Jobs-Wages-and-Structural-Transformation http://hdl.handle.net/10986/36188 |
| Summary: | Foreign direct investment (FDI) can
provide important opportunities for middle-class jobs by
stimulating employment growth, paying wage premiums, and
helping to shift workers out of less productive sectors.
This analysis exploits regional variations in sales to
examine the effect that multinational corporations (MNCs) in
the manufacturing sector have on employment and wages in
Indonesia between 2007 and 2015. Using interaction effects,
it explores how these effects differ by workers’ education
level, occupation, and employment status. The study finds
that manufacturing MNCs raise average wages in their sector.
Yet, higher-educated workers benefit more, and white-collar
workers see greater benefits than blue-collar workers. Women
also appear to benefit more than men, as a result of the
type of labor-intensive sectors MNCs engage in. The study
finds evidence that manufacturing FDI can help to accelerate
structural transformation, as workers move out of
lower-productivity sectors (agriculture and low-skilled
services) and into higher-productivity manufacturing. |
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