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

This article examines the effect of foreign direct investment (FDI) on wages in Indonesian manufacturing. An econometric analysis of a panel of plants between 1975 and 1999 finds 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. The effect of foreign ownership on wages differed among sectors but was always positive.