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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.

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  • 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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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • P42 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Productive Enterprises; Factor and Product Markets; Prices

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