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The cleansing effect of minimum wages Minimum wages, firm dynamics and aggregate productivity in China

Florian Mayneris (), Sandra Poncet () and Tao Zhang ()
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Tao Zhang: Shanghai University of International Business and Economics

No 2014015, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We here consider how Chinese firms adjust to higher minimum wages and how these affect aggregate productivity, exploiting the 2004 minimum-wage reform in China. We find that higher city-level minimum wages reduced the survival probability of firms which were the most exposed to the reform. For the surviving firms, thanks to significant productivity gains, wage costs rose without any negative employment effect. At the city-level, our results show that higher minimum wages affected aggregate productivity growth via both productivity growth in incumbent firms and the net entry of more productive firms. Hence, in a fast-growing economy like China, there is a cleansing effect of labor-market standards.

Keywords: minimum wages; fi rm-level performance; aggregate TFP; China (search for similar items in EconPapers)
JEL-codes: O14 J38 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-cna
Date: 2014-10-20
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Working Paper: The cleansing effect of minimum wages. Minimum wages, firm dynamics and aggregate productivity in China (2014) Downloads
Working Paper: The cleansing effect of minimum wages - Minimum wages, firm dynamics and aggregate productivity in China (2014) Downloads
Working Paper: The cleansing effect of minimum wages - Minimum wages, firm dynamics and aggregate productivity in China (2014) Downloads
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