The impact of district minimum wage on employment by firms in Indonesia

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

PhD Seminar (Econ)

Date & time

Friday 12 October 2018


Crawford Seminar Room 1


Nurina Merdikawati, PhD Scholar, Crawford School of Public Policy

Since decentralisation, many Indonesian districts have introduced minimum wage rates. This paper examines the effect of district minimum wages on employment in the formal manufacturing sector in Java, using data for the period 2005–2013. The identification strategy employs firm and year fixed effects and takes into account district conditions that potentially affect both the minimum wage and firms’ decisions to employ workers. The findings reveal that higher minimum wages lead to reduced employment by firms. The effect is more apparent among low-skilled production workers and for employment by large firms. Female workers are disproportionately affected. The effect for employment in small firms is not significant.

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