EconPapers    
Economics at your fingertips  
 

How does Decentralized Minimum Wage Setting affect Employment and Informality? The case of Indonesia

Margherita Comola () and Luiz de Mello

Post-Print from HAL

Abstract: The Indonesian labor market is characterized by widespread and growing informality (defined as non-salaried work). To what extent can the growth in informality be attributed to a sharp increase in the real value of the minimum wage since 2001, when minimum-wage setting was decentralized to the provincial governments? To answer this and related questions we use survey data on the labor market, on household income and expenditure, and on the industrial sector to construct a district-level dataset spanning the period 1996 to 2004. The effects of changes in the minimum wage on unemployment, formal-sector employment, and the incidence of informality in urban areas are estimated by fixed effects with a seemingly unrelated regression estimator. We find that an increase in the ratio of the minimum to the mean wage is associated with a net increase in employment: a rise in informal-sector employment more than compensates for job losses in the formal sector.

Keywords: Indonesia; Minimum wage; Informality; Employment; Unemployment (search for similar items in EconPapers)
Date: 2011-05
Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754540
References: Add references at CitEc
Citations: View citations in EconPapers (20) Track citations by RSS feed

Published in Review of Income and Wealth, Wiley, 2011, 57 (s1), pp.s79-s99. ⟨10.1111/j.1475-4991.2011.00451.x⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: HOW DOES DECENTRALIZED MINIMUM WAGE SETTING AFFECT EMPLOYMENT AND INFORMALITY? THE CASE OF INDONESIA (2011)
Working Paper: How does Decentralized Minimum Wage Setting affect Employment and Informality? The case of Indonesia (2011)
Working Paper: How does Decentralized Minimum Wage Setting affect Employment and Informality? The case of Indonesia (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754540

DOI: 10.1111/j.1475-4991.2011.00451.x

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2022-01-09
Handle: RePEc:hal:journl:halshs-00754540