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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

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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  • Mehta, Aashish & Sun, Wei, 2013. "Does Industry Affiliation Influence Wages? Evidence from Indonesia and the Asian Financial Crisis," World Development, Elsevier, vol. 51(C), pages 47-61.
    • Handle: RePEc:eee:wdevel:v:51:y:2013:i:c:p:47-61
    DOI: 10.1016/j.worlddev.2013.05.006
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    Cited by:

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    2. Evangelia Papapetrou & Pinelopi Tsalaporta, 2017. "Inter-Industry Wage Differentials in Greece: Evidence from Quantile Regression Analysis," International Economic Journal, Taylor & Francis Journals, vol. 31(1), pages 51-67, January.
    3. Cabral, René & Mollick, André Varella, 2017. "Mexican real wages and the U.S. economy," Economic Modelling, Elsevier, vol. 64(C), pages 141-152.
    4. Evangelia Papapetrou & Pinelopi Tsalaporta, 2016. "Inter-industry wage differentials in Greece: rent-sharing and unobserved heterogeneity hypotheses," Working Papers 213, Bank of Greece.

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    More about this item

    Keywords

    Inter-industry wage differential; Competitive labor market; Indonesia; Financial crisis; Employment;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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