Export Expansion and Labor Market Dynamics in Indonesia
Indonesia’s export boom following China’s WTO accession significantly improved labor market outcomes, particularly in regions with strong manufacturing activity. The study finds that between 2000 and 2014, districts more exposed to manufacturing export expansion experienced higher formal employment growth and greater income gains among lower- and middle-income groups, while commodity-driven exports yielded limited benefits. Using district-level and satellite data, the analysis highlights how manufacturing—especially in labor-intensive sectors like textiles and electronics—helped workers transition from informal to formal jobs, enhancing equity and job security. However, informality remains widespread, with over half of the workforce still in precarious employment. The study calls for policies that promote manufacturing investment, strengthen vocational training, enforce labor standards, and support regional industrial diversification. It concludes that diversifying exports beyond commodities is essential for sustainable, inclusive growth and offers a model for other developing economies seeking to translate trade gains into broad-based prosperity.