Minimum Wages and Firm Employment: Evidence from China
IMF Working Papers, October 16, 2014
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- Minimum Wages and Firm Employment: Evidence from China
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Bibliographic details
- Authors: Yifei Huang, Prakash Loungani, Gewei Wang
- Published: October 16, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498332309.001
Summary
- Study period: 2000-2007.
- Dataset: minimum wage regulations across more than 2,800 counties matched with firm-level data.
- Main objective: estimate how minimum wage policies and the 2004 tightening of policy enforcement in China affect firm employment.
Methods
- Econometric approach: dynamic panel (difference GMM) estimator.
- Identification enhancement: “neighbor-pairs-approach” to control for unobservable heterogeneity common to “border counties” subject to different minimum wage changes.
- Treatment examined: minimum wage changes and the 2004 policy enforcement tightening.
Key findings
- Estimated employment elasticity with respect to minimum wage increases: -0.1.
- Heterogeneous effects by firm wage level:
- Minimum wage increases have a greater negative impact on employment in low-wage firms than in high-wage firms.
- Results robustness:
- Findings are robust across different treatment groups.
- Robust to sample attrition correction.
- Robust to placebo tests.
Interpretation and implications
- Evidence indicates that minimum wage increases during 2000-2007 in China reduced firm employment on average, with disproportionate effects on low-wage firms.
- The 2004 tightening of policy enforcement is explicitly examined as part of the policy treatment affecting employment outcomes.
By Yifei Huang, Prakash Loungani, Gewei Wang; October 16, 2014. Source: IMF Working Papers — "Minimum Wages and Firm Employment: Evidence from China".