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

Mahmut Yasar and Roderick Rejesus

World Development, 2020, vol. 128, issue C

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 (search for similar items in EconPapers)
JEL-codes: D24 F14 J24 J31 L24 O14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:128:y:2020:i:c:s0305750x19304966

DOI: 10.1016/j.worlddev.2019.104847

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