Foreign Direct Investment and Value Added in Indonesia

Fredrik Sjöholm

No 2016:31, Working Papers from Lund University, Department of Economics

Abstract: Foreign Direct Investment (FDI) has increased in importance over the last decades, globally as well as in Indonesia. We examine how such inflows of FDI affects value added in Indonesia. The effect is positive: foreign firms generate relatively high levels of value added and they also seem to have a positive impact on value added in local firms. Moreover, FDI contribute to a structural change of the economy towards more high-value added activities. High value added could lead to increased investments and higher tax revenues for the government. High value added could also benefit labor through higher wages, an effect that is empirically confirmed in Indonesia.

Keywords: Foreign Direct Investment; Multinational Firms; Value Added; Industrial Development (search for similar items in EconPapers)
JEL-codes: F23 F61 F63 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-11-18
New Economics Papers: this item is included in nep-cse, nep-int and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Foreign Direct Investment and Value Added in Indonesia (2016)
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