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Exports and Employment in Indonesia: The Decline in Labor-Intensive Manufacturing and the Rise of Services

Author

Listed:
  • Aswicahyono, Haryo

    (Centre for Strategic and International Studies)

  • Brooks, Douglas H.

    (Asian Development Bank)

  • Manning, Chris

    (Australian National University)

Abstract

Employment generation has been a challenge in Indonesia since the Asian financial crisis, especially in labor-intensive manufacturing. Drawing on work by James and Fujita (2000), this paper examines the impact of exports on jobs, based on an analysis of input–output tables over the period 1995–2005. It finds that fewer jobs were created through exports in manufacturing industries in 2005 than before the crisis, because of slower growth in manufacturing exports and a shift away from light industry. The slowdown is potentially costly due to the endemic elastic supply of unskilled labor. However, there was an increase in jobs in the services sector, partly because of indirect connections with the main export industries. This could be enhanced through greater domestic and international competition in services. The main constraints to job creation through exports appear on the supply side, especially those related to poor infrastructure, an uncertain investment climate, and tight labor regulations.

Suggested Citation

  • Aswicahyono, Haryo & Brooks, Douglas H. & Manning, Chris, 2011. "Exports and Employment in Indonesia: The Decline in Labor-Intensive Manufacturing and the Rise of Services," ADB Economics Working Paper Series 279, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0279
    Note: http://www.adb.org/sites/default/files/economics-wp279.pdf
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    Cited by:

    1. John Anyanwu, 2014. "Working Paper 201 - Does Intra-African Trade Reduce Youth Unemployment in Africa ?," Working Paper Series 2107, African Development Bank.
    2. Esquivias, Miguel Angel & Purwono, Rudi & Sugiharti, Lilik & Heriqbaldi, Unggul & Handoyo, Rossanto Dwi, 2020. "Value Chains, Production Networks and Regional Integration: The Case of Indonesia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 54(1), pages 135-151.
    3. Kyunghoon Kim & Andy Sumner & Arief Anshory Yusuf, 2018. "Is structural transformation-led economic growth immiserising or inclusive? The case of Indonesia," Departmental Working Papers 2018-11, The Australian National University, Arndt-Corden Department of Economics.
    4. Mehta, Aashish & Sun, Wei, 2013. "Does Industry Affiliation Influence Wages? Evidence from Indonesia and the Asian Financial Crisis," World Development, Elsevier, vol. 51(C), pages 47-61.
    5. Hande Aksoz Yilmaz, 2021. "Panel Data Model Analysis on the Relationship Between Export and Employment: The Case of OECD Countries," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 8(2), pages 115-139, July.
    6. Barli Suryanta & Arianto A. Patunru, 2023. "Determinants of Foreign Direct Investment in Indonesia," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(1), pages 109-131, January.
    7. Vandenberg, Paul, 2017. "Can Trade Help Achieve the Employment Targets of the Sustainable Development Goals?," ADBI Working Papers 650, Asian Development Bank Institute.
    8. Ha Thi Thanh Doan & Trinh Quang Long, 2019. "Technical Change, Exports, and Employment Growth in China: A Structural Decomposition Analysis," Asian Economic Papers, MIT Press, vol. 18(2), pages 28-46, Summer.
    9. Cervantes M., Rosario & Fabián Rojas, Ana Sofía & Fujii Gambero, Gerardo, 2016. "The labour content of Mexican manufactures, 2008 and 2012," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    10. Richard Grabowski, 2017. "Limited access states and elections: an unexpected economic consequence," Evolutionary and Institutional Economics Review, Springer, vol. 14(1), pages 61-78, June.
    11. John C. Anyanwu, 2014. "Does Intra‐African Trade Reduce Youth Unemployment in Africa?," African Development Review, African Development Bank, vol. 26(2), pages 286-309, June.

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