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Do minimum wages affect firms’ labor and capital? Evidence from Vietnam

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  • Cuong Viet Nguyen

Abstract

This study measures the effect of minimum wage increases on firm outcomes using fixed effects regression and panel data from Vietnam Enterprise Censuses during 2008–2010. It finds that minimum wages reduce firms’ labor size, albeit at a small magnitude. A one-percent increase in real minimum wages leads to a 0.1% reduction in the number of workers of firms. Firms are more likely to reduce male workers and those without social insurance. As a result, the proportion of female workers and workers with social insurance in firms increases due to minimum wages. Interestingly, under pressure of minimum wages, firms tend to increase assets, especially fixed assets, for labor substitution.

Suggested Citation

  • Cuong Viet Nguyen, 2017. "Do minimum wages affect firms’ labor and capital? Evidence from Vietnam," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 22(2), pages 291-308, April.
  • Handle: RePEc:taf:rjapxx:v:22:y:2017:i:2:p:291-308
    DOI: 10.1080/13547860.2016.1276697
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    References listed on IDEAS

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    1. Sofia Bauducco & Alexandre Janiak, 2012. "Minimum wages strike back: the effects on capital and labor demands in a large-firm framework," Documentos de Trabajo 287, Centro de Economía Aplicada, Universidad de Chile.
    2. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, August.
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