Minimum Wage Hikes, Innovation, and Corporate Investment

Heng Griffin GENG*, Yi HUANG, Chen LIN, Sibo LIU

*Corresponding author for this work

Research output: Other Conference ContributionsConference Paper (other)Other Conference Paperpeer-review

Abstract

This paper studies how minimum wage policies affect capital investment using the industrial census of manufacturing firms in China, where minimum wage policies vary across counties. Exploiting minimum wage policy discontinuities at county borders, we find that, following minimum wage hikes, firms increase capital investment, patent outputs, and machine imports. The investment response to minimum wage hikes is stronger for firms that are labor-intensive, that have more room for technological improvement, and that cannot sufficiently pass on labor costs to consumers. A natural experiment based on county jurisdictional changes further assures the causal relationship.
Original languageEnglish
Publication statusPublished - 23 Oct 2020
Event2020 Financial Management Association Virtual Conference -
Duration: 19 Oct 202023 Oct 2020
https://www.fma.org/virtual2020

Conference

Conference2020 Financial Management Association Virtual Conference
Abbreviated title2020 FMA
Period19/10/2023/10/20
Internet address

Bibliographical note

We thank Renee Adams, Chun Chang, Luke Chu, Jan Feld, Richard Freeman, Eric French, Harald Hau, Wei Huang, Oğuzhan Karakaş, Bibo Liu, Yao Lu, Claudio Michelacci, Marco Pagano, Vincenzo Quadrini, Hélène Rey, Rui Shen, Tao Shen, Qi Sun, Paolo Volpin, Michael Weber, Wei Xiong, Haichun Ye, and the conference and seminar participants at Auckland University of Technology, Chinese University of Hong Kong (Shenzhen), the Graduate Institute of Geneva, Harvard University, Labor and Finance Working Group, NBER workshop, SFS Cavalcade Asia-Pacific 2017, Shanghai University of Finance and Economics, Swiss Finance Institute, and Tsinghua University for their helpful comments.

Keywords

  • Minimum Wage
  • Investment
  • Capital-labor Substitution
  • Innovation

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