Trade and Minimum Wages in General Equilibrium: Theory and Evidence

Bai, Xue; Chatterjee, Arpita; Krishna, Kala; Ma, Hong

doi:10.3386/w24456

Cited by 8 publications

(8 citation statements)

References 31 publications

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“…This is consistent with Bai et al (2018) and Fan, Lin, and Tang (2018), who show a greater effect of minimum wage on export performances and OFDI in industries with higher labor intensity, respectively.…”

supporting

confidence: 91%

“…The regression results are shown in columns 1 and 3 of Table 3. We refer to the method of Bai et al (2018), and rank cities by GDP per capita every year. We divide all of the cities from small to large into 20 groups, and use the average minimum wage of other cities in the same group as an IV for the minimum wage of each city.…”

Section: Resultsmentioning

confidence: 99%

“…Among them, Wang Fan et al (2018) study the relationship between changes in the minimum wage and firms' export and FDI, respectively. 5 However, none of these papers analyze the differentiated effects of minimum wage on innovation for importing firms and non-importing firms. We aim to fill this gap in the literature.…”

Section: Introductionmentioning

confidence: 99%

“…This paper also belongs to the vast literature on the economic effects of minimum wage regulations in China. Among them, Wang and Gunderson (2011), Huang, Loungani, and Wang (2014), Fang and Lin (2015), Long and Yang (2016), and Bai et al (2018) study the effects of minimum wages on labor employment. Mayneris, Poncet, and Zhang (2018) and Hau, Huang, and Wang (forthcoming) examine the impacts of minimum wages on firms' input‐substitution, management practice, and productivity.…”

Section: Introductionmentioning

confidence: 99%

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Minimum Wages, Import Status, and Firms' Innovation: Theory and Evidence From China

et al. 2020

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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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supporting

confidence: 91%

Section: Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Minimum Wages, Import Status, and Firms' Innovation: Theory and Evidence From China

et al. 2020

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“…As the number of matches increase with the number of searching workers, an increase in the minimum wage induces more workers, who were previously not searching, to participate in the labor market, thus raising their chances of finding employment. Developing a heterogeneous firm model under perfect competition in a Heckscher-Ohlin setting, Bai et al (2018) showed that a binding minimum wage raises the product prices of capacity-constrained firms, encouraging substitution away from labor, and thus creating unemployment. They found robust evidence in support of their theoretical predictions using Chinese firm-level production data.…”

Section: Introductionmentioning

confidence: 99%

Minimum wage, trade and unemployment in general equilibrium

Marjit

Ganguly

Acharyya

2020

Int J of Economic Theory

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The path‐breaking work of Card and Krueger, showing that a higher minimum wage can increase employment, turned the age‐old conventional wisdom on its head. This paper demonstrates that this apparently paradoxical result is perfectly plausible in a competitive general equilibrium production structure of a small open economy with a non‐traded good, without recourse to monopsony, spatial heterogeneity, heterogeneity of consumers and so on, the usual theoretical drivers behind the result. Following Jones and Marjit, we build a simple general equilibrium model with production complementarity and we show that a higher minimum wage can raise aggregate employment. Expansion in the non‐traded sector following a wage hike may be consistent with the overall expansion of the export sector in a multi‐good framework, an unlikely outcome in a conventional two‐good model which cannot accommodate with production complementarity.

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Trade, Unemployment and Inequality in Product Variety Models—An Analytical Survey

Marjit

Dutta

2022

India Studies in Business and Economics

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Trade and Minimum Wages in General Equilibrium: Theory and Evidence

Cited by 8 publications

References 31 publications

Minimum Wages, Import Status, and Firms' Innovation: Theory and Evidence From China

Minimum Wages, Import Status, and Firms' Innovation: Theory and Evidence From China

Minimum wage, trade and unemployment in general equilibrium

Trade, Unemployment and Inequality in Product Variety Models—An Analytical Survey

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