Nickel, Steel and Cars: Export Ban and Domestic Value-Added in Indonesia

Hiau Looi Kee and Enze Xie

No 11249, Policy Research Working Paper Series from The World Bank

Abstract: Nickel is essential for producing iron and steel. Endowed with the world's largest reserve, Indonesia banned nickel exports in 2014 to promote industrialization. This paper studies the impacts of the export ban on downstream steel-using industries. A three-sector model shows that, while the export ban could raise the domestic value-added ratio (DVAR) in exports, the entry of smaller, inefficient firms led to aggregate efficiency losses downstream. Firm-level evidence confirms higher DVAR, smaller firm size, and larger entrant shares in downstream industries post the export ban. A field mission validated these results, while noting the continued heavy reliance on imported steel.

Date: 2025-11-10
New Economics Papers: this item is included in nep-bec, nep-int, nep-mac and nep-sea
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