Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245493 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9312
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Exploiting minimum-wage variation within multi-state commuting zones, we document a negative relationship between minimum wages and firm variety in the U.S. restaurant and retail-trade industries. To explain this finding, we construct a heterogeneous-firm model with a monopsonistic labor market and endogenous firm variety. The decentralized equilibrium underprovides the mass of firms compared to the outcome achieved by a welfare-maximizing planner. A binding minimum wage further reduces the mass of firms, exacerbating the distortion. Workers value employer variety, and thus, by reducing firm variety the minimum wage reduces workers' welfare even if the average wage increases.
Subjects: 
minimum wage
number for firms
love of employer variety
JEL: 
J38
J42
Document Type: 
Working Paper
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