Output growth of the Malaysia’s manufacturing sector – do foreign workers matter?

Abstract

Purpose The purpose of this paper is to examine the impact of migrant workers on the output growth of 15 sub-industries of the manufacturing sector in Malaysia during the period 1990–2008. The paper seeks to answer the following critical questions: what is the impact of migrant workers on the output growth of the manufacturing sector, the leading sector of Malaysian economy? It is possible that migrant workers with different skill levels may have different impacts on output growth of such sector? Design/methodology/approach The paper employs three econometric techniques: mean group, dynamic fixed effect and the pooled mean group on extended form for Cobb–Douglas production function. Findings The overall findings suggest that due to the inflow of low skills of migrant workers, output growth in the manufacturing sectors is likely to witnesses a marginal decline in the long run. Originality/value The present study complements previous studies by providing a quantitative assessment of the impact of migrant workers on output growth in the manufacturing sector in Malaysia, which is not attempted in extant literature. More importantly, the analysis considers the probability that migrant workers with different skill levels may have different impacts on the growth of output in the manufacturing sector.