The Impact of Minimum Wages on Employment in a Low Income Country: An Evaluation Using the Difference-in-Differences Approach

43 Pages Posted: 20 Apr 2016

See all articles by Vivi Alatas

Vivi Alatas

World Bank - Jakarta

Lisa A. Cameron

University of Melbourne - Melbourne Institute: Applied Economic & Social Research; IZA Institute of Labor Economics; J-PAL

Date Written: March 2003

Abstract

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. Alatas and Cameron find some evidence of a negative employment impact for small, domestic firms but no employment impact for large firms, foreign or domestic.

This paper - a product of the Environment and Social Development Sector Unit, East Asia and the Pacific Region - is part of a larger effort in the region to assess the poverty situation and related issues.

Suggested Citation

Alatas, Vivi and Cameron, Lisa A., The Impact of Minimum Wages on Employment in a Low Income Country: An Evaluation Using the Difference-in-Differences Approach (March 2003). Available at SSRN: https://ssrn.com/abstract=636347

Vivi Alatas (Contact Author)

World Bank - Jakarta ( email )

Jakarta Stock Exchange Bldg. Tower 2, 12th Floor
Jl. Jend. Sudirman Kav. 52-53
Jakarta, 12190
Indonesia

Lisa A. Cameron

University of Melbourne - Melbourne Institute: Applied Economic & Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=744

J-PAL ( email )

66 bis avenue Jean Moulin
Paris, 75014
France

HOME PAGE: http://www.povertyactionlab.org/cameron

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