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Does Industry Affiliation Influence Wages? Evidence from Indonesia and the Asian Financial Crisis

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  • Mehta, Aashish
  • Sun, Wei
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    Abstract

    We exploit panel data and large, abrupt, and unusual dislocations of Indonesian workers in the wake of the Asian Financial Crisis to investigate the robustness and persistence of inter-industry wage differentials (IWDs). Unobserved worker characteristics explain 36% of IWDs. IWDs persist through the post-crisis decade, although, consistent with a rent-sharing explanation, they shift alongside sectors’ terms of trade in the wake of the crisis. Agriculture pays a wage penalty, and manufacturing offers a statistically significant but small premium. Most IWDs do not seem to be driven by minimum wage laws, worker monitoring costs, the disagreeability of the work, job-specific skills, industry-specific human capital, nonwage benefits, or contracting terms.

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    Bibliographic Info

    Article provided by Elsevier in its journal World Development.

    Volume (Year): 51 (2013)
    Issue (Month): C ()
    Pages: 47-61

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    Handle: RePEc:eee:wdevel:v:51:y:2013:i:c:p:47-61

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    Web page: http://www.elsevier.com/locate/worlddev

    Related research

    Keywords: Inter-industry wage differential; Competitive labor market; Indonesia; Financial crisis; Employment;

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