Abstract

The creation of stable and high-paying jobs by private firms is a first-order issue for Low-and-Medium Income Countries (LMICs). Little is known as to whether trade liberalization helps achieve this goal. In this study, we investigate the impact of the ASEAN-China Free Trade Agreement (ACFTA), signed in 2002, on the probability of being a wage-worker in Indonesia, a proxy for better-paid jobs in the Indonesian context. We find no evidence that import and export tariff reductions increased the probability of being a wage-worker, except for those that have more than primary education (less than a quarter of the working-age population). Consistent with this absence of effect at the worker level, we also find no significant changes in employment or value added in large and medium-sized manufacturing firms, which are the main providers of salaried jobs. Our results call for cautious optimism regarding the potential gains in terms of job quality from further trade liberalization in LMICs, particularly in a global environment where tariffs are already low. 

Funding

This work was supported by the Fonds Wetenschappelijk Onderzoek – Vlaanderen (FWO) and the Fonds de la Recherche Scientifique – FNRS under EOS Project No. 30784531 “Winners and losers from globalization and market integration”