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

  • Alatas, Vivi
  • Cameron, Lisa

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.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2985.

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Date of creation: 31 Mar 2003
Date of revision:
Handle: RePEc:wbk:wbrwps:2985
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  1. 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.
  2. repec:cup:cbooks:9780521594127 is not listed on IDEAS
  3. Rama, Martin, 1996. "The consequences of doubling the minimum wage : the case of Indonesia," Policy Research Working Paper Series 1643, The World Bank.
  4. Gruber, Jonathan, 1997. "The Incidence of Payroll Taxation: Evidence from Chile," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S72-101, July.
  5. 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 S1-19, July.
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