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

Author

Listed:
  • 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.

Suggested Citation

  • Ma, Shuang & Sun, Churen & Tian, Guoqiang, 2011. "Minimum wage and export: evidence from Chinese firm-level data," MPRA Paper 35098, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:35098
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    References listed on IDEAS

    as
    1. Hartmut Egger & Peter Egger & James R. Markusen, 2012. "International Welfare And Employment Linkages Arising From Minimum Wages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(3), pages 771-790, August.
    2. 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.
    3. 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 239-244, February.
    4. 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.
    5. Albert G. Schweinberger, 1978. "Employment Subsidies and the Theory of Minimum Wage Rates in General Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 92(3), pages 361-374.
    6. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    7. 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.
    8. 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.
    9. 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 149-164, February.
    10. Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 98-116.
    11. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
    12. Brecher, Richard A., 1974. "Optimal commercial policy for a minimum-wage economy," Journal of International Economics, Elsevier, vol. 4(2), pages 139-149, May.
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    More about this item

    Keywords

    Minimum wage; heterogeneous firm; productivity; export;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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