Firm-level Effects of Minimum Wages

Olena Chorna

Prague Economic Papers, 2021, vol. 2021, issue 4, 402-425

Abstract: We investigate how increases in minimum wage affect various firm-level characteristics. We study firm-level data from Poland, where the minimum wage experienced a large and persistent increase in 2008 and 2009. We show that firms which were more exposed to the minimum wage increase faced higher increases in total labour costs and larger reductions in profitability. Intuitively, higher total labour costs driven by higher minimum wages directly reduce firm profits in the absence of price adjustments. We also show that the sharp increases in the minimum wage increased capital and decreased overall labour productivity and employment. The impact of policy is statistically significant only on capital.

Keywords: Minimum wage; firm profitability; Kaitz index; difference in differences (search for similar items in EconPapers)
JEL-codes: C21 J23 L25 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.18267/j.pep.773

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