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Globalization's impact on compliance with labor standards

  • Harrison, Ann
  • Scorse, Jason

In an effort to shed some light on the larger question of labor standardsvand globalization, we seek to examine compliance with minimum wage legislation in Indonesia. Indonesia is an ideal case study because the govern ment made minimum wages a central component of its labor market policies in the 1990s. During this time, minimum wages quadrupled in nominal terms and doubled in real terms. In this paper we estimate the relationship between international competition and compliance with the statutory minimum wage in Indonesia. We identify firms facing international competition with two plant-level indica tors. First, we use the plant's export orientation as one measure of international competition. Second, we use the plant's foreign ownership as another measure of international competition. Critics claim that foreign firms are exploiting foreign workers, although our research on developing countries has shown that foreign enterprises are more likely to pay higher wages. This framework provides a direct test of the relationship between meas ures of globalization and labor standards, as defined by compliance with the regional minimum wage.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36450.

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Date of creation: 2003
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Handle: RePEc:pra:mprapa:36450
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  1. Strobl, Eric & Walsh, Frank, 2003. "Minimum Wages and Compliance: The Case of Trinidad and Tobago," Economic Development and Cultural Change, University of Chicago Press, vol. 51(2), pages 427-50, January.
  2. Eric Edmonds, 2007. "Child Labor," Working Papers id:988, eSocialSciences.
  3. Ashenfelter, Orley & Smith, Robert S, 1979. "Compliance with the Minimum Wage Law," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 333-50, April.
  4. William F. Maloney & Jairo Nunez Mendez, 2003. "Measuring the Impact of Minimum Wages: Evidence from Latin America," NBER Working Papers 9800, National Bureau of Economic Research, Inc.
  5. Aitken, B. & Harrison, A. & Lipsey, R.E., 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States," Papers 95-21, Columbia - Graduate School of Business.
  6. Brian Aitken & Gordon H. Hanson & Ann E. Harrison, 1994. "Spillovers, Foreign Investment, and Export Behavior," NBER Working Papers 4967, National Bureau of Economic Research, Inc.
  7. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2003. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," NBER Working Papers 9669, National Bureau of Economic Research, Inc.
  8. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February.
  9. Bell, Linda A, 1997. "The Impact of Minimum Wages in Mexico and Colombia," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S102-35, July.
  10. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September.
  11. Martφn Rama, 2001. "The Consequences of doubling the minimum wage: The case of Indonesia," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 864-881, July.
  12. Kimberly Ann Elliott & Richard B. Freeman, 2003. "Can Labor Standards Improve under Globalization?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 338, May.
  13. Harrison, Ann E & Scorse, Jason, 2005. "Do foreign-owned firms pay more? : evidence from the Indonesian manufacturing sector 1990-99," ILO Working Papers 378377, International Labour Organization.
  14. Jeffrey J. Schott, 2000. "WTO after Seattle, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 317, May.
  15. Currie, Janet & Harrison, Ann E, 1997. "Sharing the Costs: The Impact of Trade Reform on Capital and Labor in Morocco," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S44-71, July.
  16. Alatas, Vivi & Cameron, Lisa, 2003. "The impact of minimum wages on employment in a low income country : an evaluation using the difference-differences approach," Policy Research Working Paper Series 2985, The World Bank.
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