How to order
IMF Publications

Working Papers in full text
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 All

Other research-related activities and publications of the IMF can be found at IMF Research

Free Email Notification

Receive emails when we post new items of interest to you.

Subscribe or Modify your profile

The Impact of Introducing a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong Kong SAR

Author/Editor: Porter, Nathaniel John | Vitek, Francis
Authorized for Distribution: December 1, 2008
Electronic Access: Free Full Text (PDF file size is 805KB)
Use the free Adobe Acrobat Reader to view this PDF file.
 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We study the impact of a minimum wage on business cycle volatility, depending upon its coverage and adjustment mechanism. As with other small open economies, Hong Kong SAR is vulnerable to external shocks, with its exchange rate regime precluding active monetary policy. Adjustment to past shocks has relied on flexible domestic prices. We find that a minimum wage affecting 20 percent of employees would amplify output volatility by 0.2 percent to 9.2 percent, and employment volatility by ?1.2 percent to 7.8 percent. A fixed wage or indexation to consumption price inflation increases volatility most. Indexation to wage inflation or unit labor cost growth is preferable, largely preserving labor market flexibility.
 
Series: Working Paper No. 08/285
Subject(s): Minimum wage | Hong Kong Special Administrative Region of China | Business cycles | External shocks | Exchange rate regimes | Monetary policy | Inflation | Wage indexation | Labor market policy | Economic models
Author's keyword(s): Minimum wage | indexation mechanism | business cycle volatility | dynamic stochastic general equilibrium model | unobserved components model | market flexibility | small open economy
 
English  
    Published:   December 1, 2008        
            Format:   Paper
    Stock No:   WPIEA2008285   Pages:   54
    Price:   US$18.00 (Academic Rate: US$18.00 )
        
     
Please address any questions about this title to publications@imf.org.