Asian Economic Development Seminar

Date: 2018/03/01 (Thu) 16:30-18:00
Venue: Tonantei(R.201), Second Floor, Inamori Center, Kyoto
University (Pharmaceutical Sciences Campus, No.35 in the map)

Speaker: Ian Coxhead (University of Wisconsin-Madison)

Title: “Job displacement and individual earnings in a developing
economy: Indonesia” (joint with Rashesh Shrestha)

Paper is available at,

In Indonesia, an export boom and sustained, rapid GDP growth in the
decade after 2000 was accompanied by real earnings that were flat on
average, and even declining for many workers. Conventional models of
growth and trade predict that labor productivity rises as an economy
develops; that this should not be observed during a period of high GDP
growth is a puzzle that merits careful investigation.

In this paper we explore these seemingly paradoxical trends using
several waves of a panel of individual employment data. Economic
growth is rarely balanced in a sectoral sense, and the nature of the
structural change experienced by Indonesia is also strongly associated
with lower competitiveness in sectors where formal employment rates
are high, causing some degree of involuntary labor movement from
formal to informal modes of employment. We explore this
econometrically and find that the earnings of workers displaced from
formal to informal jobs are significantly lower relative to workers
who remain in the formal market. The fact of this displacement, and
its implications for individual earnings, undercuts conventional
thinking about the welfare gains from a sustained growth experience.
Our findings add, perhaps for the first time, a developing-country
dimension to the existing job displacement literature. They also shed
some light on the causes of Indonesia’s unprecedented increase in
inequality during the same growth epoch.

Ian Coxhead is a Professor in the Department of Agricultural and
Applied Economics, University of Wisconsin-Madison (UWM). He is also a
faculty affiliate of the Center for Southeast Asian Studies at UWM; he
served as Director from 2002 to 2005. He is now a Visiting Scholar,
Kobe University. He specializes in the study of growth, trade and
development, with a regional focus on East and Southeast Asia. He has
published many articles in refereed journals including American
Journal of Agricultural Economics, Journal of Development Economics,
Agricultural Economics, and World Development. He has also edited
Routledge Handbook of Southeast Asian Economics.