Investigating the Effects of Minimum Wages on Employment, Unemployment and Labour Participation in Java: A Dynamic Spatial Panel Approach

Tifani Husna Siregar*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Using district-level data for urban areas in Java, we assess the impact of minimum wages on formal- and informal-sector employment, unemployment and labour participation. We employ the spatial Durbin model for our estimation and allow labour markets to be spatially correlated across districts. Our findings suggest that a minimum-wage rise affects mainly the local labour market where the minimum-wage increase occurs. The spillover effects of a minimum-wage increase on neighbouring districts are negligible, except for the impact on labour participation. The results of this study highlight the need to account 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.

Original languageEnglish
Pages (from-to)195-227
Number of pages33
JournalBulletin of Indonesian Economic Studies
Volume58
Issue number2
DOIs
Publication statusPublished - 2022

Keywords

  • formal-sector employment
  • Indonesia
  • informal-sector employment
  • minimum wages
  • spatial econometrics

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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