Abstract
We exploit data from the China Household Finance Survey to examine the impact of changes in the minimum wage on employment and investment decisions. We are able to non-parametrically identify the average treatment effect on the treated via exogenous variation in the minimum wage across provinces. We find that changes in the minimum wage had no adverse effects on employment (in terms of days worked per month or hours worked per work day) but found evidence that changes in the minimum wage impacted the percentage of families that had a bank account, a family in a rural area owned their home, and whether families (whose highest level of education was primary school) planned to purchase a home.
Highlights
Economic theory suggests that an increase in the minimum wage, ceteris paribus, will have adverse effects on employment
Using a methodology which non-parametrically identifies the average treated effect on the treated (ATET) population, we do not find significant adverse effects on employment in terms of days worked per month or hours worked per work day
With regard to investment decisions, we find some significant impacts of minimum wage changes
Summary
Economic theory suggests that an increase in the minimum wage, ceteris paribus, will have adverse effects on employment. More recently, economists have argued that modest increases in the minimum wage do not have significant adverse effects on employment. The most influential study is arguably Card and Krueger (1994) In their large study of the fast-food industry, they found insignificant impacts of the minimum wage on employment across US state lines. If their results are true, it is possible that increases in the minimum wage may have positive benefits to society for at least a portion of society. We are able to exploit (arguably) exogenous shocks (to the households) of increases in the minimum wage that occur across provinces. We have access to repeated cross-sections of surveys in the summers of 2015 and 2017 to analyze the impacts of these treated and controlled households
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