This study focuses on the efficiency of minimum wage policy for poverty reduction, taking Indonesia as a case study. A simulation approach assesses who benefits and who pays for minimum wage increases. On the benefits side, the rise in minimum wages boosts incomes in households with low wage workers. However, increases in wage costs are passed on through higher consumer prices. As a result, three out of four poor households lose in net terms, even when we assume no job losses. The findings suggest that minimum wages are unlikely to be an effective antipoverty instrument, at least for Indonesia.
In the large literature on the consequences of economic liberalisation, few studies have examined the impact on industrial structure. Indonesia provides a suitable case study: its policy reforms from the mid-1980s were decisive, and its industrial data base is relatively sophisticated. This article briefly develops a framework with which such issues may be examined, and then assesses the impact of policy reforms on seller concentration, ownership, size distribution, spatial composition, and total factor productivity growth over the pre-and post-reform periods. The main conclusion is that, unlike the liberalisation-efficiency nexus, the effects of the policy changes on industrial structure appear to be limited. Our conclusions are necessarily tentative, given the short period of time under examination, and given the difficulties -both empirical and theoretical -of establishing the direction of causality.
There are few countries where “initial conditions” are as unfavourable as those of Laos. It is a very poor, least developed country. It is land-locked, sharing its international borders with five neighbours. It has the world's highest per capita stock of unexploded ordinance, a legacy of the Indo China war. It has yet to recover from the loss of most of its entrepreneurial class and over half of its tertiary educated population in the aftermath of that war. It is heavily indebted, with substantial Soviet era obligations still outstanding. Its institutions are weak and property rights ill defined. Yet, its reform efforts over the past two decades have been largely successful, with accelerating growth and the beginnings of a relatively smooth transition from plan to market. This examination of the Lao reform programme and the subsequent outcomes suggests that, contrary to some of the prevailing pessimism, late-comers can engage with the international economy, providing their reforms are reasonably effective and credible. Neighbourhood effects have obviously been supportive in the Lao case, but their importance should not be overstated.
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