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The impact of the minimum wage on the characteristics of new establishments: Evidence from South Korea

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  • Baek, Jisun
  • Lee, Changkeun
  • Park, WooRam

Abstract

This paper examines how the minimum wage affects the characteristics of new establishments. We utilize the introduction of a minimum wage of South Korea in 1988 and exploit a data covering the universe of new plants subject to this law. From difference-in-differences analyses, we first confirm that the introduction of the minimum wage caused new plants to remit higher remuneration to workers. Due to the minimum wage, new plants tended to start with fewer employees and to equip their employees with more capital. Finally, we find that the minimum wage led to higher labor productivity among entering plants.

Suggested Citation

  • Baek, Jisun & Lee, Changkeun & Park, WooRam, 2021. "The impact of the minimum wage on the characteristics of new establishments: Evidence from South Korea," Labour Economics, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:labeco:v:72:y:2021:i:c:s0927537121000944
    DOI: 10.1016/j.labeco.2021.102059
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    More about this item

    Keywords

    Minimum wage introduction; Employment; Capital intensity; Labor productivity; Entering plants; Establishment-level data;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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