Does the minimum wage affect employment ? evidence from the manufacturing sector in Indonesia
AbstractUsing survey data from the Indonesian manufacturing industry, this paper investigates the impact of minimum wage on employment and wages offered by Indonesian manufacturing firms from 1993 to 2006. It shows that the estimated effects of minimum wage on employment are positive within a province (i.e., with province fixed effects), but negative within a firm (i.e., with firm fixed effects), indicating the importance of using firm panel data to reduce the endogeneity bias in estimates. It finds significant heterogeneous effects of minimum-wage changes on employment. The employment effects of minimum wages are significant and negative among small firms and less educated workers, but not among large firms and workers with high school education and above. The negative employment impact is more severe for non-production workers than for production workers. The analysis also shows that the minimum wage disproportionally affects women: most of the non-production job losses are experienced by female workers. Lastly, the paper finds that the minimum wage is more correlated with the average wage of small firms than that of large firms, suggesting that minimum wages are more binding in small firms.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6147.
Date of creation: 01 Jul 2012
Date of revision:
Labor Markets; Labor Policies; Microfinance; Corporate Social Responsibility; Tertiary Education;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-29 (All new papers)
- NEP-DEV-2012-07-29 (Development)
- NEP-LAB-2012-07-29 (Labour Economics)
- NEP-LMA-2012-07-29 (Labor Markets - Supply, Demand, & Wages)
- NEP-SEA-2012-07-29 (South East Asia)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The impact of the minimum wage in a developing economy
by Economic Logician in Economic Logic on 2012-08-13 15:08:00
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