Essays on international trade and labor in Indonesia

This dissertation studies the impact of international trade on the Indonesia labor market. The first chapter investigates how task trading induce workers to change jobs. To understand the link between international trade and workers' occupation choices, I propose a general equilibrium model with heterogeneous workers self-selecting into different tasks according to their skill-specific comparative advantage, individual task-specific abilities and task prices. Task outsourcing from foreign countries acts as a demand shock that influences workers' occupation decisions through changing task prices. The model predicts that occupational employments shifts with foreign task demand. I use Indonesian data to estimate this effect. The main finding is that during the post-opening period (2002-2006), growth in mining goods demanded by foreign countries induced workers to move into manual jobs. The second chapter uses the Indonesia plant level data to examine how importing intermediate goods affects the demand for highly educated workers within and across production and non-production occupations categories. We estimate a model of importing and skill-biased technological change in which selection into importing arises due to unobservable heterogenous returns from importing. Both instrumental variable regression and marginal treatment effect estimates confirm that importing has substantially increased the relative demand for educated workers within each occupation. In contrast, we do not consistently estimate a significant impact of importing on the relative demand for non-production workers. The last chapter examines the relationship between trading dynamics of plants and the aggregate skill demand at different margins (reallocation of workers across plants versus the skill composition changes within plants). We find that plants that switched from domestic to trade grew in employment shares. This growth was skill biased for plants that started importing, but not for plants that started exporting. Consequently, the growth in size and increase in the skill intensities of the plants that switched from non-importing to importing increase in the aggregate demand for skilled workers. Plants that stopped importing or exporting laid off workers, more unskilled workers are involved in this reduction. The plants that continue trading grew in size, and the growth was not bias toward workers of any skill type. Given that always-trading plants are most skill intensive, their growth increase the aggregate skill demand.Arts, Faculty ofVancouver School of EconomicsGraduat