Multinational Corporations in Indonesia and Thailand: Wages, Productivity, and Exports

By Hutchinson, Francis Edward | Journal of Southeast Asian Economies, December 2008 | Go to article overview
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Multinational Corporations in Indonesia and Thailand: Wages, Productivity, and Exports


Hutchinson, Francis Edward, Journal of Southeast Asian Economies


Multinational Corporations in Indonesia and Thailand: Wages, Productivity, and Exports, edited by Eric D. Ramstetter and Fredrik Sjoholm. Basingstoke: Palgrave Macmillan, 2006. Pp. 229.

This book analyses factory-level data from Indonesia and Thailand to gain insights into the effects of multinational corporations on wages, productivity, and exports in host countries. Looking at Southeast Asia's two biggest economies, it brings together work from Eric Ramstetter, one of the leading experts on MNC operations, internationally-renowned economist Robert Lipsey, as well as a group of area specialists and economists, many from Japan's International Centre for the Study of East Asian Development.

Through looking at micro-level data from both countries, the book seeks to explore how MNC investment affects host country economies and labour markets. In order to do so, it asks and attempts to answer the following questions:

* Do MNCs pay higher wages, have higher productivity levels, and are they more likely to export than local firms?

* Is there a relationship between wage levels, productivity, propensity to export, and foreign ownership share?

* Do MNCs provide wage or productivity spillovers for locally owned firms in the same industry?

* How do takeovers by MNCs affect wages in the plant concerned or elsewhere in the sector?

After an introductory chapter by the editors, Ramstetter and Sjoholm, the book is divided into three sections. The first section on wage differentials and spill-overs contains chapters by Lipsey and Sjoholm, and Movshuk and Matsuoka-Movshuk on Indonesia and Thailand, respectively. The second section on productivity differentials and spill-overs is comprised of a chapter each on Indonesian and Thai manufacturing by Takii and Ramstetter respectively, in addition to a chapter by Ito that looks at the automobile industry in both countries. The last section contains a chapter by Sjoholm and Takii on exports and foreign ownership in Indonesia's manufacturing sector, and a chapter on the same topic in Thailand by Ramstetter and Umemoto.

This is a solid book that deals with very technical issues in a succinct and clear manner. Unlike many publications that result from a research project, as this book was, it reads like a coherent whole. It is clear and well-written, explaining technical issues without recourse to jargon.

The book shows empirically that there are significant differences between local firms and MNCs in both countries. MNCs were shown to significantly affect propensity to export, as well as generate wage and productivity spill-overs for local operations in Indonesia and Thailand. There are, however, significant differences regarding the effects on wages and productivity between the two countries. In Indonesia, the relationship between wages, productivity and foreign ownership is strong. In Thailand, in contrast, wages displayed the same relationship with foreign ownership as in Indonesia--albeit to a lesser degree.

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