Exports and Employment in Indonesia: The Decline in Labor-Intensive Manufacturing and the Rise of Services

35 Pages Posted: 3 Jan 2012

See all articles by H. H. Aswicahyono

H. H. Aswicahyono

affiliation not provided to SSRN

Douglas Brooks

Asian Development Bank

Chris Manning

Australian National University - Division of Economics; Australian National University (ANU) - Crawford School of Public Policy

Date Written: October 1, 2011

Abstract

Employment generation has been a challenge in Indonesia since the Asian financial crisis, especially in labor-intensive manufacturing. Drawing on work by James and Fujita (2000), this paper examines the impact of exports on jobs, based on an analysis of input-output tables over the period 1995-2005. It finds that fewer jobs were created through exports in manufacturing industries in 2005 than before the crisis, because of slower growth in manufacturing exports and a shift away from light industry. The slowdown is potentially costly due to the endemic elastic supply of unskilled labor. However, there was an increase in jobs in the services sector, partly because of indirect connections with the main export industries. This could be enhanced through greater domestic and international competition in services. The main constraints to job creation through exports appear on the supply side, especially those related to poor infrastructure, an uncertain investment climate, and tight labor regulations.

Suggested Citation

Aswicahyono, H. H. and Brooks, Douglas and Manning, Chris, Exports and Employment in Indonesia: The Decline in Labor-Intensive Manufacturing and the Rise of Services (October 1, 2011). Asian Development Bank Economics Working Paper Series No. 279, Available at SSRN: https://ssrn.com/abstract=1978638 or http://dx.doi.org/10.2139/ssrn.1978638

H. H. Aswicahyono (Contact Author)

affiliation not provided to SSRN

Douglas Brooks

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Chris Manning

Australian National University - Division of Economics ( email )

Canberra, Australian Capital Territory 2601
Australia

Australian National University (ANU) - Crawford School of Public Policy

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

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