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Domestic labor cost shocks and global risk: Minimum wages and export market concentration in China

Author

Listed:
  • He, Ye
  • Ding, Zijian
  • Xu, Wenjing
  • Zhang, Zhixin

Abstract

This paper examines how rising domestic labor costs shape firms’ export strategies. Using a panel of Chinese manufacturing exporters from 2002 to 2013, we study whether increases in local minimum wage standards lead firms to diversify exports across more foreign markets or concentrate in fewer core export markets. Our findings show that higher minimum wages significantly increase export market concentration, suggesting that cost pressures force firms exit from marginal export markets. Heterogeneity analyses reveal that the effect is stronger for low-productivity firms, low-wage firms, more labor-intensive firms, and those in eastern regions. By highlighting how domestic policy changes affect firms’ export decisions, this study contributes to the literature on the real economic impact of labor regulations and advances understanding of the drivers of export market concentration in emerging economies.

Suggested Citation

  • He, Ye & Ding, Zijian & Xu, Wenjing & Zhang, Zhixin, 2026. "Domestic labor cost shocks and global risk: Minimum wages and export market concentration in China," Finance Research Letters, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:finlet:v:88:y:2026:i:c:s1544612325024687
    DOI: 10.1016/j.frl.2025.109219
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    References listed on IDEAS

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