Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171101
Authors: 
Hau, Harald
Huang, Yi
Wang, Gewei
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6637
Abstract: 
The large regional variation in minimum wage levels in the period 2002-08 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 labor 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 labor cost shocks can be explained by differences in management practices, and suggests that management quality and competitive pressure are complementary.
Subjects: 
firm productivity
capital investment
minimum wage policy
JEL: 
D24
G31
J24
J31
O14
Document Type: 
Working Paper
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