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The impact of minimum wages on employment in a low income country : an evaluation using the difference-differences approach

Author

Listed:
  • Alatas, Vivi
  • Cameron, Lisa

Abstract

Unlike the well-developed literature on the employment impact of the minimum wage in industrial nations, very little is known about minimum wage effects in low income countries. Minimum wages increased sharply in Indonesia between 1990 and 1996 and by more in some provinces than in others. Following Card and Krueger (1994) the authors exploit the large geographic variation in the rate of increase and compare changes in employment in the clothing, textile, footwear, and leather industries on either side of the Jakarta-West Java border. They use household level labor market data to establish compliance with the legislation. They obtain matched difference-in-difference estimates of the employment impact using a census of all large and medium-size firms in the clothing, textile, leather, and footwear industries. The authors find some evidence of a negative employment impact for small, domestic firms but no employment impact for large firms, foreign or domestic.

Suggested Citation

  • 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.
  • Handle: RePEc:wbk:wbrwps:2985
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    References listed on IDEAS

    as
    1. Manning,Chris, 1998. "Indonesian Labour in Transition," Cambridge Books, Cambridge University Press, number 9780521594127, December.
    2. Harrison, Ann E & Leamer, Edward, 1997. "Labor Markets in Developing Countries: An Agenda for Research," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 1-19, July.
    3. Gruber, Jonathan, 1997. "The Incidence of Payroll Taxation: Evidence from Chile," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 72-101, July.
    4. Alida Castillo Freeman & Richard B. Freeman, 1991. "Minimum Wages in Puerto Rico: Textbook Case of a Wage Floor?," NBER Working Papers 3759, National Bureau of Economic Research, Inc.
    5. Martín Rama, 2001. "The Consequences of Doubling the Minimum Wage: The Case of Indonesia," ILR Review, Cornell University, ILR School, vol. 54(4), pages 864-881, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, pages 1611-1638.
    2. 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.
    3. Pierre, Gaelle & Scarpetta, Stefano, 2004. "Employment regulations through the eyes of employers - do they matter and how do firms respond to them?," Policy Research Working Paper Series 3463, The World Bank.
    4. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2017. "Minimum Wages in Sub-Saharan Africa: A Primer," World Bank Research Observer, World Bank Group, vol. 32(1), pages 21-74.
    5. Margherita Comola & Luiz de Mello, 2009. "How Does Decentralised Minimum-Wage Setting Affect Unemployment and Informality?: The Case of Indonesia," OECD Economics Department Working Papers 710, OECD Publishing.
    6. Mary Amiti & Lisa Cameron, 2007. "Economic Geography and Wages," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 15-29, February.
    7. Chris Manning, 2004. "Legislating for Labour Protection: Betting on the Weak or the Strong?," Departmental Working Papers 2004-08, The Australian National University, Arndt-Corden Department of Economics.
    8. Harrison, Ann & Scorse, Jason, 2005. "Improving the conditions of workers? Minimum wage legilsation and anit-sweatshop activism," MPRA Paper 36276, University Library of Munich, Germany.
    9. Giovanni Immordino, 2003. "Fairness, NGO Activism and the Welfare of Less Developed Countries," CSEF Working Papers 101, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 Dec 2007.
    10. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.
    11. Stephen Devereux, 2005. "Can minimum wages contribute to poverty reduction in poor countries?," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(7), pages 899-912.
    12. Pierre, Gaelle & Scarpetta, Stefano, 2007. "How labor market policies can combine workers'protection with job creation : a partial review of some key issues and policy options," Social Protection and Labor Policy and Technical Notes 41439, The World Bank.
    13. Mary Amiti & Lisa Ann Cameron, 2004. "Economic Geography and Wages; The Case of Indonesia," IMF Working Papers 04/79, International Monetary Fund.
    14. Ann Harrison & Jason Scorse, 2004. "Moving Up or Moving Out? Anti-Sweatshop Activists and Labor Market Outcomes," NBER Working Papers 10492, National Bureau of Economic Research, Inc.
    15. Harrison, Ann & Scorse, Jason, 2003. "Globalization's impact on compliance with labor standards," MPRA Paper 36450, University Library of Munich, Germany.

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