• Dyah Savitri Pritadrajati Oxford Poverty and Human Development Initiative
Keywords: Minimum wage, Human capital investment, School enrolment


This paper investigates the role of minimum wages in determining school enrolment (educational investment) in Indonesia using the National Socioeconomic Survey (Susenas). It finds that minimum wage legislation has a negative and significant substitution effect on educational investment. Individuals are more likely to drop out of senior secondary school as a result of a minimum wage legislation. Even though the response among low-income households is positive, this result may be generated by a fall in the probability of obtaining low-skilled employment, which offset the substitution effect.


Download data is not yet available.


Acemoglu, D., & Autor, D. (2000). Lectures in Labour Economics. https://economics.

Acemoglu, D., & Pischke, J. S. (2001). Changes in the Wage Structure, Family Income, and Children’s Education. European Economic Review, 45, 890-904.

Becker, G. S. (1964). Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition). The University of Chicago Press.

Becker, G. S., & Tomes, N. (1986). Human capital and the Rise and Fall of Families. Journal of Labour Economics, 4, 1-47.

Bell, L. A. (1999). The Impact of Minimum Wages in Mexico and Colombia. The World Bank.

Brown, C., Gilroy, C., & Kohen, A. (1982). The Effect of the Minimum Wage on Employment and Unemployment. Journal of Economic literature, 20, 487-528.

Brownstone, D., & Small, K.A. (1989). Efficient Estimation of Nested Logit Models. Journal of Business Economic Statistics, 27, 67-74.

Cahuc, P., & Michel, P. (1996). Minimum Wage Unemployment and Growth. European Economic Review, 40, 1463-1482.

Cameron, L. A., & Alatas, V. (2003). The Impact of Minimum Wages on Employment in a Low-income Country: An Evaluation Using the Difference-in-differences Approach. The World Bank.

Card, D., & Krueger, A. B. (1993). Minimum Wage and Employment: A Case Study of the Fast-food Industry in New Jersey and Pennsylvania (No. w4509). National Bureau of Economic Research.

Chaplin, D. D., Turner, M. D., & Pape, A. D. (2003). Minimum Wage and School Enrolment of Teenagers: A Look at the 1990s. Economics of Education Review, 22,11-21.

Chen, D. (2009). Vocational Schooling, Labour Market Outcomes, and College Entry (No. 4814). The World Bank.

Chun, N., & Khor, N. (2010). Minimum Wage and Changing Wage Inequality in Indonesia (No. 196). Asian Development Bank.

Davies, J. B., & Zhang, J., (1995). Gender Bias, Investments in Children, and Bequests. International Economic Review, 795-818.

Dreze, J., Sen, A., & Hussain, A. (1995). The Political Economy of Hunger: Selected Essays. Oxford University Press.

Ehrenberg, R. G., & Marcus, A. J. (1982). Minimum Wage and Teenagers’ Enrolment-Employment Outcomes: A Multinomial Logit Model. Journal of Human Resources, 39-58.

Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46, 1251–1271.

Heiss, F. (2002). Structural Choice Analysis with Nested Logit Models. The Stata Journal, 2, 227-252.

Hohberg, M., & Lay, J. (2015). The Impact of Minimum Wage on Informal and Formal Labour Market Outcomes: Evidence from Indonesia. IZA Journal of Labour Development, 4, 14.

Johnston, D., & Morduch, J. (2008). The Unbanked: Evidence from Indonesia. The World Bank Economic Review, 22, 517-537.

Khamis, M. (2013). Does the Minimum Wage Have a Higher Impact on the Informal than on the Formal Labour Market? Evidence from Quasi-experiments. Applied Economics, 45, 477-495.

Landon, S. (1997). High School Enrolment, Minimum Wage and Education Spending. Canadian Public Policy/Analyse de Politiques, 141-163.

Mattila, J. P. (1978). Youth Labour Markets, Enrolments, and Minimum Wage. In Proceedings of the 31st Annual Meeting, Industrial Relations Research Association Series (pp. 134-40).

Neumark, D., & Wascher, W. (1994). Minimum Wage Effects and Low-wage Labour Markets: A Disequilibrium Approach (No. w4617). National Bureau of Economic Research.

Neumark, D., & Wascher, W. L. (2007). Minimum Wage and Employment. Foundations and Trends in Microeconomics, 3, 1-182.

Pacheco, G. A., & Cruickshank, A. A. (2007). Minimum Wage Effects on Educational Enrolments in New Zealand. Economics of Education Review, 26, 574-587.

Rice, P. (2010). Minimum Wage and Schooling: Evidence from the UK’s Introduction of a National Minimum Wage. SERC Discussion Paper, 50.

Souza, P. R., & Baltar, P. E. (1979). Salário Mínimo e Taxa de Salários no Brasil.

Suryahadi, A., Widyanti, W., Perwira, D., & Sumarto, S. (2003). Minimum Wage Policy and its Impact on Employment in the Urban Formal Sector. Bulletin of Indonesian Economic Studies, 39, 29-50.

Train, K. E. (2009). Discrete Choice Methods with Simulation. Cambridge University Press.

Widarti, D. (2006). Role of Minimum Wage in Informal Wage Determination in Indonesia. ILO.

Wongsangaroonsri, P. (2016). The Implications of Minimum Wage Policy on School Enrolment: An Empirical Analysis of Indonesia (Thesis).

How to Cite
Pritadrajati, D. (2021). DETERMINANTS OF SCHOOL ENROLMENT IN INDONESIA: THE ROLE OF MINIMUM WAGE. Buletin Ekonomi Moneter Dan Perbankan, 24(2), 181 - 204.