Technological change, skill demand, and wage inequality: Evidence from Indonesia

Jong Wha Lee, Dainn Wie

Research output: Contribution to journalArticlepeer-review

61 Citations (Scopus)


This study provides empirical evidence of the impact that technological progress has on wage inequality in Indonesia. The share of educated workers and their skill premiums have recently increased. A supply-demand analysis, using labor force survey data during 1990-2009, shows that both the between- and within-industry shifts of labor demand that favored skilled workers contributed to the widening wage inequality since the early 2000s. Evidence from firm-level data in the manufacturing sector indicates that the diffusion of foreign technologies through imports and foreign direct investment caused demand to shift toward more skilled labor and increased wage inequality.

Original languageEnglish
Pages (from-to)238-250
Number of pages13
JournalWorld Development
Publication statusPublished - 2015 Mar 1

Bibliographical note

Funding Information:
We thank Robert Barro, Eric Hanushek, Francesco Caselli, two anonymous referees, and participants at the Workshop on Human Capital and Economic Development at Harvard University for their valuable comments. This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government ( NRF-2008-362-A00001 ) and a Korea University Grant .

Publisher Copyright:
© 2014 Elsevier Ltd.


  • Foreign direct investment
  • Globalization
  • Indonesia
  • Technology
  • Wage inequality

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Sociology and Political Science
  • Economics and Econometrics


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