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.
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