Effect of Trade Liberalisation on Wage Inequality in Indonesia

Watekhi (), Nachrowi D. Nachrowi (), Djoni Hartono and Arie Damayanti ()
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Watekhi: Statistics Indonesia
Nachrowi D. Nachrowi: Faculty of Economics and Business, Universitas Indonesia
Arie Damayanti: Faculty of Economics and Business, Universitas Indonesia

Malaysian Journal of Economic Studies, 2018, vol. 55, issue 2, 209-229

Abstract: This study attempts to find out the influence of trade liberalisation on wage inequality in Indonesia. A two-stage estimation approach is used. Using the national labour force survey dataset, the study estimates industry wage premium and industry-specific skill premium in the first stage conditional on individual worker characteristics. In the second stage, the study regresses industry wage premium and industry-specific skill premium on tariff as a measure of trade liberalisation, respectively. It is concluded that trade liberalisation significantly contributes to increasing wage inequality. This contribution occurred through changes in industry wage premium but not industry-specific skill premium.

Keywords: Industry-specific skill premium; trade liberalisation; wage inequality; wage premium (search for similar items in EconPapers)
JEL-codes: F14 F16 J31 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:mjr:journl:v:55:y:2018:i:2:p:209-229

DOI: 10.22452/MJES.vol55no2.4

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