This paper investigates the developments in wage inequality in Indonesia over two time periods, 1994 to 2001 and 2001 to 2007. Wage changes are decomposed at the mean as well along the wage distribution. While mean earnings increased by about 35 percent between 1994 and 2001, they grew moderately between 2001 and 2007, with the increase for male workers being near zero. In the first period, the substantial growth in the earnings of workers has contributed to moderately reducing earnings inequality, a development driven by the effect of coefficients (“prices”). However, in the more recent period, wage inequality increased sharply, with workers at the bottom 20 percent of the earnings distribution experienced a decline in earnings while workers at the top of the earnings distribution enjoyed a significant increase in earnings. These results are attributed to the return to earnings generating characteristics which increased sharply at higher deciles of the earnings distribution
Chris SAKELLARIOU (Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore, Nanyang Technological University, Singapore)
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Paper provided by Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre in its series Economic Growth centre Working Paper Series with number
0906.
Find related papers by JEL classification: D33 - Microeconomics - - Distribution - - - Factor Income Distribution J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
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