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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6637

Classification and Topics

• Classification: Wirtschaft ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Capital Budgeting; Fixed Investment and Inventory Studies; Capacity ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Wage Level and Structure; Wage Differentials ; Industrialization; Manufacturing and Service Industries; Choice of Technology
• Subject: firm productivity ; capital investment ; minimum wage policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hau, Harald ; Huang, Yi ; Wang, Gewei
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/171101
• Last update: 10.03.2025, 11:44 AM CET