The Indonesian labor market is characterized by widespread and growing informality (defined as non‐salaried work). To what extent can the growth in informality be attributed to a sharp increase in the real value of the minimum wage since 2001, when minimum‐wage setting was decentralized to the provincial governments? To answer this and related questions we use survey data on the labor market, on household income and expenditure, and on the industrial sector to construct a district‐level dataset spanning the period 1996 to 2004. The effects of changes in the minimum wage on unemployment, formal‐sector employment, and the incidence of informality in urban areas are estimated by fixed effects with a seemingly unrelated regression estimator. We find that an increase in the ratio of the minimum to the mean wage is associated with a net increase in employment: a rise in informal‐sector employment more than compensates for job losses in the formal sector.

We propose a test of whether self-reported network data is best seen as an actual link or willingness to link and, in the latter case, whether this link is generated by an unilateral or bilateral link formation process. We illustrate this test using survey answers to a risksharing question in an African village. We …nd that bilateral link formation …ts the data better than unilateral link formation, but the data are best interpreted as willingness to link rather than an actual link. We then expand the model to include self-censoring and …nd it to …t the data signi…cantly better than willingness to link. This suggests that, in our data, the data generating process behind self-reported links is a hybrid between an actual link and willingness to link. JEL codes: C12; C52; D85

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Networks may rewire in response to interventions. We propose a measure of the treatment effect when an intervention affects the structure of a social network. We develop a treatment-response model that incorporates dynamic peer effects and provide its identification conditions and the associated instrumental-variable strategy. We illustrate our estimation procedure using a panel dataset containing information on a financial network before and after a field experiment that randomized access to savings accounts. Results show that neglecting the network change results in underestimation of the impact of the intervention and the role played by informal networks through which the intervention diffuses.