Minimum wages and household income distribution: Evidence from China

Jiwei Chen and Zhigang Xu

Review of Development Economics, 2024, vol. 28, issue 4, 1572-1601

Abstract: Based on the 2004–2015 China Health and Nutrition Survey (CHNS) data, this article examines the effect of minimum wages on household income distribution. The results show that minimum wage increases significantly reduce the probability of per capita household net income falling below the poverty threshold, indicating that minimum wage can play a role in poverty reduction. Furthermore, we find that minimum wages significantly reduce the probability of per capita household income being 0–3 times lower than the poverty threshold, but have little effect on households with per capita net income more than 3 times the poverty threshold, which means that minimum wage increases can reduce household income inequality. We also find heterogeneous effects of minimum wage increases on household income distribution across gender, education, hukou, and age of household heads. Finally, we show that minimum wage increases play a role in regulating household income distribution by increasing the wages of employed individuals in households.

Date: 2024
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