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Do Minimum Wages Affect Firms’ Labor and Capital? Evidence from Vietnam

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  • Nguyen, Cuong

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 is found 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 percent 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.

Suggested Citation

  • Nguyen, Cuong, 2012. "Do Minimum Wages Affect Firms’ Labor and Capital? Evidence from Vietnam," MPRA Paper 48656, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:48656
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    File URL: https://mpra.ub.uni-muenchen.de/48656/1/MPRA_paper_48656.pdf
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    References listed on IDEAS

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    4. Arias-Vazquez, Javier & Gamberoni, Elisa & Nguyen, Cuong, 2013. "A Short-Term Effect of a Better Work Programme on Firms’ Performance: Evidence from Vietnam," MPRA Paper 67475, University Library of Munich, Germany.
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    More about this item

    Keywords

    Minimum wages; firms; impact evaluation; panel data; Vietnam;
    All these keywords.

    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

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