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The impact of minimum wages on informal and formal labor market outcomes: evidence from Indonesia

Listed author(s):
  • Maike Hohberg
  • Jann Lay

    ()

Registered author(s):

This paper studies the effects of minimum wages on informal and formal sector wages and employment in Indonesia between 1997 and 2007. Applying fixed-effects methods, the estimates suggest that minimum wages have a significant positive effect on formal sector wages, while there are no spillover effects on informal workers. Regarding employment, we find no statistically significant negative effects of minimum wages on the probability of being formally employed. These findings suggest that employers use adjustment channels other than employment or that effects such as a demand stimulus on a local level outweigh the possible negative employment effects. Jel codes: J08, J46 Copyright Hohberg and Lay. 2015

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File URL: http://hdl.handle.net/10.1186/s40175-015-0036-4
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Article provided by Springer & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA) in its journal IZA Journal of Labor & Development.

Volume (Year): 4 (2015)
Issue (Month): 1 (December)
Pages: 1-25

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Handle: RePEc:spr:izaldv:v:4:y:2015:i:1:p:1-25:10.1186/s40175-015-0036-4
DOI: 10.1186/s40175-015-0036-4
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  1. Haroon Bhorat & Ravi Kanbur & Natasha Mayet, 2013. "The impact of sectoral minimum wage laws on employment, wages, and hours of work in South Africa," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-27, December.
  2. Dinkelman, Taryn & Ranchhod, Vimal, 2012. "Evidence on the impact of minimum wage laws in an informal sector: Domestic workers in South Africa," Journal of Development Economics, Elsevier, vol. 99(1), pages 27-45.
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