Does Industry Affiliation Influence Wages? Evidence from Indonesia and the Asian Financial Crisis

Aashish Mehta and Wei Sun

World Development, 2013, vol. 51, issue C, 47-61

Abstract: We exploit panel data and large, abrupt, and unusual dislocations of Indonesian workers in the wake of the Asian Financial Crisis to investigate the robustness and persistence of inter-industry wage differentials (IWDs). Unobserved worker characteristics explain 36% of IWDs. IWDs persist through the post-crisis decade, although, consistent with a rent-sharing explanation, they shift alongside sectors’ terms of trade in the wake of the crisis. Agriculture pays a wage penalty, and manufacturing offers a statistically significant but small premium. Most IWDs do not seem to be driven by minimum wage laws, worker monitoring costs, the disagreeability of the work, job-specific skills, industry-specific human capital, nonwage benefits, or contracting terms.

Keywords: Inter-industry wage differential; Competitive labor market; Indonesia; Financial crisis; Employment (search for similar items in EconPapers)
JEL-codes: J31 J63 O15 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:51:y:2013:i:c:p:47-61

DOI: 10.1016/j.worlddev.2013.05.006

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