Trade and minimum wages in general equilibrium: Theory and evidence

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.

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Work Title Trade and minimum wages in general equilibrium: Theory and evidence
Access
Open Access
Creators
  1. Xue Bai
  2. Arpita Chatterjee
  3. Kala Krishna
  4. Hong Ma
Keyword
  1. Trade
  2. Minimum wage
  3. General equilibrium
  4. Heterogeneous firms
  5. Selection
License In Copyright (Rights Reserved)
Work Type Article
Publisher
  1. Journal of International Economics
Publication Date November 1, 2021
Publisher Identifier (DOI)
  1. https://doi.org/10.1016/j.jinteco.2021.103535
Deposited August 03, 2022

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Version 1
published

  • Created
  • Added MinWage_Final_Main.pdf
  • Added Creator Xue Bai
  • Added Creator Arpita Chatterjee
  • Added Creator Kala Krishna
  • Added Creator Hong Ma
  • Published
  • Updated Keyword Show Changes
    Keyword
    • Trade, Minimum wage, General equilibrium, Heterogeneous firms, Selection
  • Updated