Imported intermediates and labor productivity differential of foreign and domestic establishments in Malaysia's electrical and electronic sector

Abstract

This study examines differences between foreign and local establishments in the Malaysian electrical and electronics sector and whether higher use of imported inputs affect labor productivity by utilizing a balanced panel data set at the establishment-level for the period of 2000- 2005. The results of two-way fixed effect estimations (as the best model) for all foreign ownership measures, whether in terms of foreign ownership dummies or the actual foreign ownership share, show that there is no significant evidence of labor productivity differences between foreign and local establishments. Labor productivity is positively related to the capital intensity and scale economies of each establishment while negatively related to market concentration. However, both labor quality and the imported input share have no significant effect on labor productivity of each establishment.