Trade and Minimum Wages in General Equilibrium: Theory and Evidence

Xue Bai (), Arpita Chatterjee, Kala Krishna () and Hong Ma

No 24456, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a new model with heterogeneous firms under perfect competition in a Heckscher-Ohlin setting. We derive a novel prediction regarding the effect of minimum wages on selection, namely that a binding minimum wage will raise (or lower) TFP at the firm and industry level depending on whether the capital intensity of entry costs exceeds (falls short of) that of production. Exploiting rich regional variation in minimum wages across Chinese counties and using firm level production data, we find robust evidence in support of causal effects of minimum wages consistent with our theoretical predictions.

JEL-codes: H0 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-int and nep-lma
Note: ITI
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Citations: View citations in EconPapers (7)

Published as Xue Bai & Arpita Chatterjee & Kala Krishna & Hong Ma, 2021. "Trade and minimum wages in general equilibrium: Theory and evidence," Journal of International Economics, vol 133.

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Journal Article: Trade and minimum wages in general equilibrium: Theory and evidence (2021)
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