Minimum Wage and Financially Distressed Firms: Another One Bites the Dust

Fernando Alexandre (), Pedro Bação, João Cerejeira (), Hélder Costa and Miguel Portela ()
Additional contact information
Fernando Alexandre: University of Minho
Hélder Costa: University of Minho

No 13526, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Since late 2014, Portuguese Governments adopted ambitious minimum wage policies. Using linked employer-employee data, we provide an econometric evaluation of the impact of those policies. Our estimates suggest that minimum wage increases reduced employment growth and profitability, in particular for financially distressed firms. We also conclude that minimum wage increases had a positive impact on firms' exit, again amplified for financially distressed firms. According to these results, minimum wage policies may have had a supply side effect by accelerating the exit of low profitability and low productivity firms and, thus, contributing to improve aggregate productivity through a cleansing effect.

Keywords: productivity; financially distressed firms; minimum wage (search for similar items in EconPapers)
JEL-codes: E24 J38 L25 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2020-07
New Economics Papers: this item is included in nep-eur and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: Labour Economics, 2022, 24, 102088

Downloads: (external link)
https://docs.iza.org/dp13526.pdf (application/pdf)

Related works:
Journal Article: Minimum wage and financially distressed firms: Another one bites the dust (2022)
Working Paper: Minimum wage and financially distressed firms: another one bites the dust (2020)
Working Paper: Minimum wage and financially distressed firms: another one bites the dust (2020)
Working Paper: Minimum wage and financially distressed firms: another one bites the dust (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp13526

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().