The Impacts of Multinational Companies on the Manufacturing Wage Inequality: Evidence from Indonesia

摘要

Inward Foreign Direct Investment (FDI) is generally believed to have a positive effect on the host country's economy. However, several studies have documented that FDI by multinational companies (MNCs) may also relate to rising wage inequality issue. Assuming that MNCs are playing an important role in introducing new technology in Indonesia's manufacturing sector, this study will investigate whether multinational companies have an impact on skilled-unskilled wage gap in the Indonesia's manufacturing sector. The study will also attempt to interpret whether the effect is non-linear - inward FDI increases wage inequality but at a decreasing rate over time. The findings show that MNCs give non-linear effect to wage inequality in Indonesia's manufacturing sector.