Effect of Trade Liberalisation on Wage Inequality in Indonesia

Authors

  • Watekhi Watekhi Statistics Indonesia
  • Nachrowi D Nachrowi Faculty of Economics and Business, Universitas Indonesia
  • Djoni Hartono Faculty of Economics and Business, Universitas Indonesia
  • Arie Damayanti Faculty of Economics and Business, Universitas Indonesia

DOI:

https://doi.org/10.22452/MJES.vol55no2.4

Keywords:

Industry-specific skill premium, trade liberalisation, wage inequality, wage premium

Abstract

This study attempts to find out the influence of trade liberalisation on wage inequality in Indonesia. A two-stage estimation approach is used. Using the national labour force survey dataset, the study estimates industry wage premium and industry-specific skill premium in the first stage conditional on individual worker characteristics. In the second stage, the study regresses industry wage premium and industry-specific skill premium on tariff as a measure of trade liberalisation, respectively. It is concluded that trade liberalisation significantly contributes to increasing wage inequality. This contribution occurred through changes in industry wage premium but not industry-specific skill premium.

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Published

2018-11-09

Issue

Section

Articles