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Poverty alleviation and firm productivity: Evidence from China's minimum wage system

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  • Wang, Maolin
  • Lin, Huiting
  • Huang, Yehua
  • Lu, Huiyan

Abstract

The reduction of income inequality is important for poverty alleviation. We manually collect the data of the local minimum wage standard of the 254 prefectural cities of 31 provinces in China. The results show that higher minimum wage attributes to the rise of firm productivity. Minimum wage hikes force the enterprises to optimize internal production, reduce redundant employees, and develop innovations. Moreover, the enterprises with higher sensitivity in labor cost, less governmental support, and stronger financial pressures are more intensive to higher minimum wage. It is robust when choosing alternative measurements, an IV strategy, and a DID analysis. It is implicated that an appropriate minimum wage system plays a positive role in achieving balance between poverty alleviation and economic growth, and the improvement in compensation can stimulate high-quality development in practice.

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  • Wang, Maolin & Lin, Huiting & Huang, Yehua & Lu, Huiyan, 2023. "Poverty alleviation and firm productivity: Evidence from China's minimum wage system," International Review of Financial Analysis, Elsevier, vol. 87(C).
    • Handle: RePEc:eee:finana:v:87:y:2023:i:c:s1057521923001114
    DOI: 10.1016/j.irfa.2023.102595
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