Minimum Wages and Poverty in a Developing Country: Simulations from Indonesia's Household Survey
AbstractThis study focuses on the efficiency of minimum wage policy for poverty reduction, taking Indonesia as a case study. A simulation approach assesses who benefits and who pays for minimum wage increases. On the benefits side, the rise in minimum wages boosts incomes in households with low wage workers. However, increases in wage costs are passed on through higher consumer prices. As a result, three out of four poor households lose in net terms, even when we assume no job losses. The findings suggest that minimum wages are unlikely to be an effective antipoverty instrument, at least for Indonesia.
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Bibliographic InfoPaper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2005-09.
Length: 30 pages
Date of creation: 2005
Date of revision:
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More information through EDIRC
Minimum Wages; Poverty; Income distribution; Indonesia;
Other versions of this item:
- Bird, Kelly & Manning, Chris, 2008. "Minimum Wages and Poverty in a Developing Country: Simulations from Indonesia's Household Survey," World Development, Elsevier, vol. 36(5), pages 916-933, May.
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-11 (All new papers)
- NEP-CMP-2005-09-11 (Computational Economics)
- NEP-DEV-2005-09-11 (Development)
- NEP-LAB-2005-09-11 (Labour Economics)
- NEP-SEA-2005-09-11 (South East Asia)
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