How Does the Minimum Wage Affect Firm Investments in Fixed and Human Capital? Evidence from China

Tobias Haepp () and Carl Lin
Additional contact information
Tobias Haepp: Peking University

No 10332, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper empirically analyzes the impact of Chinese minimum wage regulations on the firm decision to invest in physical and human capital. We exploit the geographical and inter-temporal variations of county-level minimum wages in a panel data set of all state-owned and all above-scale non-state-owned Chinese firms covering the introduction of the new Chinese minimum wage regulations in 2004. In our basic regressions including all Chinese firms, we find significant negative effects of the minimum wage on human capital investment rates and no overall effects on fixed capital investment rates. When grouping firms by their ownership structure, we find that these results hold for most firms. Foreign-owned firms are an exception to some extent, because the likelihood that they invest in human capital has not decreased in response to the policy.

Keywords: minimum wage; firm investment; fixed capital; human capital (search for similar items in EconPapers)
JEL-codes: J31 J38 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2016-10
New Economics Papers: this item is included in nep-cna and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Forthcoming - published in: Review of Development Economics, 2017, 21(4), 1057-1080

Downloads: (external link)
https://docs.iza.org/dp10332.pdf (application/pdf)

Related works:
Journal Article: How Does the Minimum Wage Affect Firm Investments in Fixed and Human Capital? Evidence from China (2017)
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:dp10332

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 ().