Shotaro Nakamura, University of California, Davis

"Distributional and Productivity Implications of Regulating Casual Labor: Evidence from Ridesharing in Indonesia"

Abstract

Regulations intended to improve workers' earnings, such as minimum wage, may have muted impact on policy objectives or unintended consequences due to adjustment mechanisms and general equilibrium effects. Using comprehensive transaction data from one of Indonesia's dominant platforms, we study the market-wide implications of a federal policy on minimum fares for drivers on ridesharing apps. We estimate the causal effects of the policy with difference-in-differences and synthetic control methods, exploiting an exogenous variation in the policy's rollout. We find that, on average, the policy increases the trip price but does not significantly affect the overall transaction volume nor increase driver earnings or wages. These effects are driven by a higher excess labor supply, reducing the number of transactions per driver. The excess labor supply comes from lower-earning drivers but does not lead to their increased earnings. We also find lower driver productivity, driven by two margins: an increased share of less productive drivers in the workforce and reduced individual productivity due to crowding on the supply side.

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