We acknowledge financial support from the National Natural Science Foundation of China (no. 71603155, no. 71973032) and the MOE Project of Key Research Institute of Humanities and Social Sciences in Universities (no. 18JJD790003). All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

We explore how labor union a¤ects the wealth-income ratio in an innovation-driven growth model and …nd that it depends on the union's objective. If the union is employmentoriented (wage-oriented), then a decrease in its bargaining power would have a positive (an ambiguous) e¤ect on the wealth-income ratio. Calibrating the model to data, we …nd that a decrease in union bargaining power causes a sizable increase in the wealth-income ratio, which explains at least one-third of the increase in the US wealth-income ratio.JEL classi…cation: D31, J50, O30, O43

This study explores the heterogeneous effects of minimum wage on innovation of different types of firms. We develop an open-economy R&D-based growth model and obtain the following result: raising the minimum wage reduces innovation of firms that use domestic inputs but increases innovation of firms that import foreign inputs. Intuitively, when the minimum wage increases, importing firms substitute labor with imported inputs, which have technology spillovers and enhance their innovation. We test this result using city-level data on minimum wages and firm-level patent data in China. Finally, we find that in accordance with our theory, raising the minimum wage is associated with more innovation by importing firms and less by non-importing firms. This result survives a battery of robustness checks.

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