Firm Response to Competitive Shocks: Evidence from China's Minimum Wage Policy

Harald Hau, Yi Huang and Gewei Wang

No 11429, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The large regional variation of minimum wage changes in 2002-08 implies that Chinese manufacturing firms experienced competitive shocks as a function of firm location and their low-wage employment share. We find that minimum wage hikes accelerate the input substitution from labor to capital in low-wage firms, reduce employment growth, but also accelerate total factor productivity growth--particularly among the less productive firms under private Chinese or foreign ownership, but not among state-owned enterprises. The heterogeneous firm response to labor cost shocks can be explained by differences in governance or management practice, but is difficult to reconcile with the idea that competitive pressure is a substitute for governance quality.

Keywords: Firm productivity; Minimum wage policy; Management quality (search for similar items in EconPapers)
JEL-codes: D24 G31 J24 J31 O14 (search for similar items in EconPapers)
Date: 2016-08
New Economics Papers: this item is included in nep-cfn, nep-cna, nep-cse and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://cepr.org/publications/DP11429 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Firm Response to Competitive Shocks: Evidence from China’s Minimum Wage Policy (2020)
Working Paper: Firm Response to Competitive Shocks: Evidence from China's Minimum Wage Policy (2017)
Working Paper: Firm Response to Competitive Shocks: Evidence from China’s Minimum Wage Policy (2016)
Working Paper: Firm Response to Competitive Shocks: Evidence from China’s Minimum Wage Policy (2016)
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:cpr:ceprdp:11429

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11429

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().