International linkages, technology transfer, and the skilled labor wage share: Evidence from plant-level data in Indonesia

Posted: 8 Jan 2020 Last revised: 5 Mar 2020

See all articles by Mahmut Yasar

Mahmut Yasar

University of Texas at Arlington - Department of Economics; Emory University - Department of Economics

Roderick M. Rejesus

North Carolina State University

Date Written: December 17, 2019

Abstract

This paper examines whether technology transfer through international linkages (such as the importing of intermediate inputs and foreign direct investments) influences skilled labor wage shares in Indonesian plants. Using a variety of specifications, estimators, and robustness checks (including Correlated Random Effects Probit, quantile fixed effects regression, and a moment-based instrumental variable (IV) approach), we find that the import of intermediate inputs and foreign direct investment likely facilitate the transfer of technologies from advanced nations, which then results in skill-biased technological change and increased relative skilled labor wage share. These results indicate that, contrary to standard trade theory predictions, international linkages can lead to increased demand for skilled labor and a potential widening of the skilled-unskilled labor wage gap in Indonesia. Our findings support the theoretical explanation provided by Acemoglu (2003). Since firms in developing countries like Indonesia mainly rely on technologies from advanced nations, trade is likely to increase (rather than decrease) the skilled wage premium.

Keywords: Skill-Biased Technological Change; Technology Transfer; Correlated Random Effects Probit; Fixed Effects Quantile Regression; Indonesia; Asia

JEL Classification: F14; D24; L24; J24; J31; O14

Suggested Citation

Yasar, Mahmut and Rejesus, Roderick M., International linkages, technology transfer, and the skilled labor wage share: Evidence from plant-level data in Indonesia (December 17, 2019). Yaşar, M. and R. M. Rejesus (2020). "International linkages, technology transfer, and the skilled labor wage share: Evidence from plant-level data in Indonesia." World Development, 128. Doi.org/10.1016/j.worlddev.2019.104847, Available at SSRN: https://ssrn.com/abstract=3505348

Mahmut Yasar (Contact Author)

University of Texas at Arlington - Department of Economics ( email )

701 S. West Street
Arlington, TX 76019
United States

Emory University - Department of Economics ( email )

Roderick M. Rejesus

North Carolina State University ( email )

Hillsborough Street
Raleigh, NC 27695
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
149
PlumX Metrics