The Minimum Wage in Firms' Organizations: Productivity Implications

Nicholas Lawson (), Claire Lelarge () and Grigorios Spanos ()
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Nicholas Lawson: Dalhousie University [Halifax]
Claire Lelarge: RITM - Réseaux Innovation Territoires et Mondialisation - Université Paris-Saclay, Université Paris-Saclay, CEPR - Center for Economic Policy Research
Grigorios Spanos: GSEM - Geneva School of Economics and Management

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Abstract: Taking advantage of a unique empirical setting in which different minimum wages coexisted in France during 2003-06, we document that higher minimum wages are associated with smaller firms, flatter hierarchies, more training, and higher revenue productivity per worker. We construct and calibrate a general equilibrium model of optimal hierarchies that rationalizes these facts via firms' optimization of costly labor and knowledge. These two channels generate large endogenous labor productivity gains which strongly contribute to mitigating the aggregate output loss. In relative terms, this loss is amplified in economies with better communication technologies and attenuated with better information or problem-solving technologies.

Keywords: Minimum Wage; Firms' Organizations; New Technologies (ICT; AI) (search for similar items in EconPapers)
Date: 2024-09
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