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Seminar: Wage Differentials between Foreign Multinationals and Local Plants and Worker Education in Indonesian Manufacturing

Event | 25 October 2013 ADBI, Tokyo, Japan


ADBI's Seminar Series brings eminent persons to ADBI to encourage debate among policymakers, researchers, academics, think tanks and other audiences interested in economic development challenges in Asia and the Pacific.


Eric D. Ramstetter is research professor at the International Centre for the Study of East Asian Development (ICSEAD) in Kitakyushu, Japan. He is also a visiting professor in the Graduate School of Economics at Kyushu University in Fukuoka, Japan, and in the Master of Arts in International Economics Finance program at Chulalongkorn University in Bangkok. Prior to joining ICSEAD in 1998, he was in the Faculty of Economics at Kansai University in Osaka and the East-West Center in Honolulu. He has also served as a consultant to many government and international agencies or think tanks, including the Cabinet Office of Japan, ESCAP, the Institute of Developing Economies in Tokyo, UNCTAD, and USAID. He also serves as editor of the Asian Economic Journal, executive editor of the Journal of Asian Economics, and editorial adviser to The Japanese Economy, and Economics and Finance in Indonesia. His research has been focused on the activities of multinational enterprises (MNEs) in Asian economies, especially Southeast Asian economies. Since the 1990s, much of this research has focused on comparisons of productivity, wages, and trade propensities of MNEs and local firms or plants in Asia.


Using industrial census data for 1996 and 2006, this seminar will reexamine the extent of wage differentials between medium-large (20 or more workers) foreign multinational enterprises (MNEs) and local plants in Indonesia–s manufacturing industries at a more disaggregated level (17 versus 9 industries) than in previous research (Lipsey and Sjöholm 2004). We will then analyze how these differentials changed between the initial year, which marked the end of the economic boom beginning in the mid-1980s, and the latter year, in which Indonesian per capita GDP finally recovered to 1996 levels, the last year before the 1997 Asian financial crisis and, more importantly, political turmoil decimated the Indonesian economy. Initial calculations indicate that MNE-local differentials widened during this period. However, it is not yet clear how much of this widening resulted from activities in specific industries or from changes in relative plant attributes related to MNE-local wage differentials (e.g., scale and factor intensities). These points will be clarified in the seminar.


Policymakers, academics, outside researchers and the general public.