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Consumption Response to Minimum Wages: Evidence from Chinese Households

Ernest Dautovic, Harald HauYi Huang
Review of Economics and Statistics, 2024

 

The paper evaluates the impact of the Chinese minimum wage policy on consumption of low income household for the period 2002-2009. Using a representative household panel, we find that the consumption response to minimum wage hikes is increasing in the minimum wage share of household income. In particular, we find that poorer households fully consume their additional income. This large unitary consumption elasticity of income is driven by households with at least one child, while childless poor households save two thirds of a minimum wage hike. The expenditure increase is concentrated in health care and education with potentially long-lasting benefits to household welfare.

In Brief: Voxeu

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We examine the relationship between environmental regulation and competitiveness in China. Exploiting changes in national pollution standards for three industries—ammonia, paper and cement—we test whether environmental regulation increases industry productivity. Our results show that the strong version of the Porter hypothesis does not hold, but that regulation might reallocate productivity spatially. We show that regulated industries that are located in developing cities see an increase in their productivity as compared to the same industries in other cities. This means that environmental regulation is more likely to drive the spatial distribution of productivity changes than it is to drive the pace and direction of technological change.


CIES Research Papers Series 53

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Corruption Scrutiny and Corporate Investment: Evidence from China


Frontiers of Economics in China, 2020

Carlos D. Ramirez, Yi Huang

We examine whether corporate corruption scrutiny affects corporate investment
in China. A corruption news index (CNI) containing firm-specific
measures of corruption scrutiny is developed by tracking all articles in the
press about corruption for all firms trading on the Shanghai and Shenzhen stock
exchanges between 2000 and 2011. This index is included in a traditional model of investment. We find that a standard deviation increase in CNI leads to an initial 6 percent decline in investment, a 9 percent decline the following year, but no effects after two years. Thus, anticorruption campaigns appear to carry temporary costs for corporate investment.

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This paper provides the first systematic study of how minimum wage policies in China affected firm employment over the 2001–06 period. Using a novel administrative dataset of minimum wage regulations across more than 2,800 counties matched with firm and household data, we find that minimum wage hikes have significantly negative effects on employment. We investigate the heterogeneous effect of the minimum wage on firm employment in terms of firm, industry, spatial characteristics, and labor market conditions. We show that employment falls more in response to minimum wage hikes in lower-wage firms with lower profit margins. The same is true for firms in labor-intensive industries and in labor markets with high mobility. Furthermore, a major reform in the minimum wage policy was conducted by the central government around 2004. We find that the response of firm employment growth to minimum wage hikes has become larger compared with the pre-reform period. Similar results hold for the numerous specifications and robustness checks with the attrition, implementation, and placebo tests.

NBER Chinese Economy Workshop, 2016   IMF Working Paper

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