FDI Spillovers and Wage Gaps in Indonesia

Authors

Mohammad Zeqi Yasin, Department of Economics, University of JemberFollow
Pyan Putro Surya Amin Muchtar, Arndt-Corden Department of Economics, Australian National UniversityFollow
Nur Arifin, BPS-Statistics IndonesiaFollow

Document Type

Article

Abstract

Our objective is to evaluate the competitiveness of local firms by determining whether the dynamic wage spillover model devised by Tomohara and Takii (2011) consistently captures subsectoral dynamics. We identify two subsectors that are witnessing positive spillovers using the Indonesian firm-level dataset. Nevertheless, our quantitative analysis demonstrates inconsistencies, with competitive subsectors contributing to wage disparities at a higher rate than uncompetitive firms. In other words, wage inequalities between foreign and local firms are not effectively reduced by competitive firms. In order to improve the performance of local firms and enable them to more effectively compete with foreign firms in labor markets, international trade policies should incorporate social and labor support, such as advanced skills training and education.

Recommended Citation

Yasin, Mohammad Zeqi; Muchtar, Pyan Putro Surya Amin; and Arifin, Nur (2025) "FDI Spillovers and Wage Gaps in Indonesia," Bulletin of Monetary Economics and Banking: Vol. 28: No. 1, Article 7.
DOI: https://doi.org/10.59091/2460-9196.1958
Available at: https://bulletin.bmeb-bi.org/bmeb/vol28/iss1/7

First Page

145

Last Page

170

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Indonesia

Affiliation

Department of Economics, University of Jember