Minimum Wage and Financially Distressed Firms: Another One Bites the Dust

Arbeitspapier

Since late 2014, Portuguese Governments adopted ambitious minimum wage policies. Using linked employer-employee data, we provide an econometric evaluation of the impact of those policies. Our estimates suggest that minimum wage increases reduced employment growth and profitability, in particular for financially distressed firms. We also conclude that minimum wage increases had a positive impact on firms' exit, again amplified for financially distressed firms. According to these results, minimum wage policies may have had a supply side effect by accelerating the exit of low profitability and low productivity firms and, thus, contributing to improve aggregate productivity through a cleansing effect.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 13526

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Wages, Compensation, and Labor Costs: Public Policy ; Firm Performance: Size, Diversification, and Scope
• Subject: minimum wage ; financially distressed firms ; productivity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Alexandre, Fernando ; Bação, Pedro ; Cerejeira, João ; Costa, Hélder ; Portela, Miguel
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/223968