IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-00684165.html
   My bibliography  Save this paper

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

Author

Listed:
  • Margherita Comola

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Luiz de Mello

    (Economics - OCDE - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development)

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Margherita Comola & Luiz de Mello, 2011. "How does Decentralized Minimum Wage Setting affect Employment and Informality? The case of Indonesia," Post-Print hal-00684165, HAL.
    • Handle: RePEc:hal:journl:hal-00684165
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00684165. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.