This study analyzes the impact of provincial minimum wage on the youth
employment share in Indonesia from 2005 to 2009 covering 30 provinces. The
fixed effects model is used in this study with Sakernas survey data. This study
finds that the provincial minimum wage has a negative impact on the youth
employment share, though the results are sensitive to several model specifications.
In general, we found that 1% increase in minimum wage will decrease youth
employment share by 0.3%. The lag of minimum wage tends to have stronger
effects, indicating that it takes some time for firms to react to the change in
minimum wage
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