Technological change, skill demand, and wage inequality in indonesia

Jong Wha Lee, Dainn Wie

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

This paper examines the empirical implications of technological changes for skill demand and wage inequality in Indonesia. According to the National Labor Force Survey of Indonesia, the share of educated workers and wage skill premium increased significantly over 2003-2009 for overall industry and across the region. An analysis based on demand-supply framework suggests that demand shifts favoring skilled workers during the period. The decomposition of labor demand shifts shows that they were driven not only by reallocation of labor forces between industries but also by change within industries, particularly among formal workers, suggesting evidence of skill-biased technological changes. The empirical evidence from the data of manufacturing firms suggest that diffusion of new technologies through imported materials and foreign direct investment caused greater demand for skilled labor and higher wage inequality in the manufacturing sector.

Original languageEnglish
Pages (from-to)1-32
Number of pages32
JournalADB Economics Working Paper Series
Volume340
Publication statusPublished - 2013 Mar 1

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Keywords

  • Human capital
  • Skill-biased technological change
  • Wage inequality

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Economics and Econometrics
  • Political Science and International Relations

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