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Minimum wage and export: evidence from Chinese firm-level data

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  • Ma, Shuang
  • Sun, Churen
  • Tian, Guoqiang

Abstract

This paper proposes a two-country trade equilibrium model with heterogeneous firms to investigate the influences of minimum wages and productivity on firms' exports. It shows that the influence of minimum wages on firms' exporting probability and foreign sales is negative while that of firms' productivity on their exports is positive. Econometric analysis based on the Annual Survey of Chinese Industrial Firms as well as the data of minimum wages collected ourselves from 1998 to 2007 verifies these predictions. Holding the other variables constant, if minimum wages and their productivity increase by 100%$, then the elasticity of minimum wage on firms' exporting sales is -8.6% while that of firms' productivity is 75.6%, and firms' exporting possibility decreases by 1.1%$ and increases by 1.6%$, respectively.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35098.

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Date of creation: 22 Jul 2011
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Handle: RePEc:pra:mprapa:35098

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Keywords: Minimum wage; heterogeneous firm; productivity; export;

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  1. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  2. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February.
  3. Egger, Hartmut & Egger, Peter & Markusen, James R., 2009. "International Welfare and Employment Linkages Arising from Minimum Wages," CEPR Discussion Papers 7387, C.E.P.R. Discussion Papers.
  4. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  5. Stephen Hall & P.A.V.B. Swamy & George S. Tavlas, 2009. "The Nonexistence of Instrumental Variables," Discussion Papers in Economics 09/16, Department of Economics, University of Leicester.
  6. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  7. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
  8. Inoue, Tadashi & Itsumi, Yoshitaka, 1992. "A Note on International Trade with a Minimum Wage and an Endogenous Labor Supply Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 239-44, February.
  9. Schweinberger, Albert G, 1978. "Employment Subsidies and the Theory of Minimum Wage Rates in General Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 92(3), pages 361-74, August.
  10. Brecher, Richard A., 1974. "Optimal commercial policy for a minimum-wage economy," Journal of International Economics, Elsevier, vol. 4(2), pages 139-149, May.
  11. Sun, Churen & Tian, Guoqiang & Zhang, Tao, 2011. "When Pareto meets Melitz: the inapplicability of the Melitz-Pareto model for Chinese firms," MPRA Paper 35597, University Library of Munich, Germany.
  12. Flug, Karnit & Galor, Oded, 1986. "Minimum Wage in a General Equilibrium Model of International Trade and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 149-64, February.
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