Using district level data for urban areas in Java, we reassess the impacts of minimum wages on formal and informal sector employment, unemployment and labour participation. We employ the spatial Durbin model for our estimation and let labour markets to be spatially correlated across districts. Our main findings suggest that minimum wage hikes mainly affect the local labour market where the minimum wage increase occurs. The spill over impacts of a minimum wage increase on neighbouring districts are negligible, except for its impact on labour participation. The results of this study highlight the need to ccount for spatial dependence when modelling formal sector employment, unemployment and labour participation, as we found those variables to be geographically correlated, at least across districts in Java.

This presentation is based on a forthcoming paper in the Bulletin of Indonesian Economic Studies (BIES), https://doi.org/10.1080/00074918.2021.1914817

Speaker: Tifani Husna Siregar (Waseda University)

Thursday, 26 August at 10.00-11.30am WIB

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