Trade and Wage Inequality in the Indonesian Manufacturing Sector with Firm Heterogeneity and the Impact of Currency Depreciation during the Periods 1997-1998 and 2013-2014

摘要

This study follows Verhoogen (2008) to explore the issue of trade and wage inequality from the perspective of firm heterogeneity and the impact of currency depreciation in Indonesia. The twofold objective of this study is first, to examine whether higher firm entrepreneurial ability leads to better outcome of export shares; white-collar wages; blue-collar wages; the wage ratio; and the share of white-collar workers; and second to understand whether entrepreneurial ability leads to a greater change in the optimization level over time, especially during currency-depreciation periods. This study employs Indonesian manufacturing survey data of 1996 and 2012 in an OLS econometric model. The results show that first, firms that are more productive or more entrepreneurial are more export oriented, have higher wage disparity, and have a higher proportion of white-collar employees. Second, the changes in export and wage disparity during the currency-depreciation periods of 1997-1998 and 2013-2014 show that firms were unable to take advantage of the depreciation to boost their export share. Although firm entrepreneurial ability can explain the greater wage disparity during the two depreciation periods (compared with "normal" periods), it is unclear whether this was driven by quality enhancement or better strategies.