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Minimum wage and entrepreneurship: Evidence from China

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  • Kong, Dongmin
  • Qin, Ni
  • Xiang, Junyi

Abstract

This paper investigates the effects of minimum wage (MW) policies on entrepreneurship by using all contiguous county-pairs in China that straddle prefecture borders. We find that the MW significantly and negatively affects entrepreneurship, and the results are robust to a battery of tests based on different specifications. A plausible mechanism might be the crowd-out effect of increase of labor cost, given that our findings are particularly strong in labor-intensive industries, in areas with higher labor costs or low-level access to finance. Overall, this study highlights the negative effects of minimum wage labor policy on entrepreneurship, which have yet to be fully understood.

Suggested Citation

  • Kong, Dongmin & Qin, Ni & Xiang, Junyi, 2021. "Minimum wage and entrepreneurship: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 320-336.
    • Handle: RePEc:eee:jeborg:v:189:y:2021:i:c:p:320-336
    DOI: 10.1016/j.jebo.2021.06.047
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    More about this item

    Keywords

    Minimum wage; Labor cost; Contiguous counties; Entrepreneurship;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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