Impact of Import Competition on Textile and Apparel Industries: a Dilemma Between Employment and Efficiency in Indonesia

The world has witnessed the dispute regarding import competition again and again. Governments insist on increasing import competition to induce efficiency. On the contrary, workers demand protection against import competition. It is believed there is no compromise in this dispute. It is either efficiency or workers? interest. It is undoubtedly a dilemma for governments. Simple econometric model is not applicable in resolving this issue since import competition serves as independent variable while efficiency, the number of workers and wages are set as dependent ones. Here, the dispute is analyzed by using threshold autoregressive model. It appears that governments may have more options to choose. Governments may find the level of import competition where efficiency could be stimulated without deteriorating the number of workers and wages.