Foreign Ownership and Employment Growth in a Developing Country

Many developing countries would like to increase employment in the formal sectors. One way to accomplish this goal may be to encourage the entrance of foreign firms. We examine employment growth in Indonesian plants taken over by foreign owners from domestic ones. We also examine the effect of FDI during different trade regimes and the timing of employment effects following an acquisition. For plants that change the nationality of ownership, we find a strong effect of shifts from domestic to foreign ownership in raising the growth rate of employment, but no significant effects of shifts from foreign to domestic ownership.