Effects of Minimum Wage on Import and Innovation: Theory and Evidence from China

Angus Chu, Yuichi Furukawa, Zonglai Kou and Xueyue Liu

MPRA Paper from University Library of Munich, Germany

Abstract: This study explores the heterogeneous effects of minimum wage on innovation of different types of firms. Using firm-level data in China, we find that a higher minimum wage is associated with more innovation by importing firms but less innovation by non-importing firms. To interpret these empirical findings, we develop an open-economy R&D-based growth model and find that a higher minimum wage reduces innovation of firms that use domestic inputs but increases innovation of firms that import foreign inputs. Intuitively, when a higher minimum wage reduces employment, importing firms respond by importing more inputs, which have technology spillovers and enhance their innovation.

Keywords: innovation; minimum wage; imports; knowledge spillovers (search for similar items in EconPapers)
JEL-codes: E24 F43 O31 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-cna, nep-cse, nep-int, nep-mac, nep-sbm, nep-tra and nep-ure
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https://mpra.ub.uni-muenchen.de/99736/1/MPRA_paper_99736.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:97008

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