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

• Harald Hau ^[1] ; Yi Huang ^[2] ; Gewei Wang ^[3]
  1. [1] Université de Genève

     Université de Genève

     Genève, Suiza

     
  2. [2] Graduate Institute of International and Development Studies

     Graduate Institute of International and Development Studies

     Genève, Suiza

     
  3. [3] Renmin University of China

     Renmin University of China

     China

     

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• Localización: Review of economic studies, ISSN 0034-6527, Vol. 87, Nº 6, 2020, págs. 2639-2671
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • The large regional variation in minimum wage levels during the period 2002–8 in China 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 labour to capital, reduce employment growth and 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 labour cost shocks can be explained by differences in management practices and suggests that management quality and competitive pressure are complementary.