Foreign Ownership and Employment Growth in Indonesian Manufacturing

29 Pages Posted: 9 Oct 2010

See all articles by Fredrik Sjöholm

Fredrik Sjöholm

Lund University School of Economics and Management; Research Institute of Industrial Economics (IFN)

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Jing Sun

Skidmore College

Multiple version iconThere are 2 versions of this paper

Date Written: October 8, 2010

Abstract

Many developing countries would like to increase the share of modern or formal sectors in their employment. One way to accomplish this goal may be to encourage the entrance of foreign firms. They are typically relatively large, with high productivity and good access to foreign markets, and might therefore be better at creating jobs than domestic firms are. However, previous research on the issue has been limited by the paucity of long data sets for firm operations.

We examine employment growth in Indonesia in a large panel of plants between 1975 and 2005, and especially in plants taken over by foreign owners from domestic ones. Employment growth is relatively high in foreign-owned establishments, although foreign firms own relatively large domestic plants, which in general grow more slowly than smaller plants. For plants that change the nationality of ownership during our period, we find a strong effect of shifts from domestic to foreign ownership in raising the growth rate of employment, but no significant effects of shifts from foreign to domestic ownership.

The faster growth of employment in the foreign-owned plants in general is concentrated in the takeovers, especially in the year of acquisition. Foreign takeover of a domestically-owned plant, on average, brings a large immediate expansion of employment.

Keywords: Foreign Direct Investment, Employment, Indonesia, Acquisitions

JEL Classification: J21, J23, F23

Suggested Citation

Sjöholm, Fredrik and Lipsey, Robert E. and Sun, Jing, Foreign Ownership and Employment Growth in Indonesian Manufacturing (October 8, 2010). IFN Working Paper No. 831. Available at SSRN: https://ssrn.com/abstract=1689560 or http://dx.doi.org/10.2139/ssrn.1689560

Fredrik Sjöholm (Contact Author)

Lund University School of Economics and Management ( email )

P.O Box 7080
Lund
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Jing Sun

Skidmore College ( email )

815 North Broadway
Saratoga Springs, NY 12866-1632
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
46
Abstract Views
640
PlumX Metrics