PUBLICATIONS & REPORTS

Contents Introduction

This paper asks two types of questions. One is about the behavior of foreign-owned firms in Indonesian labor markets and the other is about the effect of the presence of foreign-owned firms on Indonesian wages. We ask first whether foreign-owned establishments pay more than locally-owned establishments for workers of a given quality, given the characteristics of the establishments such as their size, industry, and location. The answer is that foreign firms do pay more. The second is whether a larger presence of foreign-owned establishments results in higher wages overall and in locally-owned establishments. The answer is that higher foreign presence leads to higher wages in locally-owned establishments and, since the foreign establishments pay higher wages than locally-owned ones, that higher foreign presence raises the general wage level in a province and industry