Prague Economic Papers 2021, 30(4):402-425 | DOI: 10.18267/j.pep.773

Firm-level Effects of Minimum Wages

Olena Chorna ORCID...a
a Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic

We investigate how increases in minimum wage affect various firm-level characteristics. We study firm-level data from Poland, where the minimum wage experienced a large and persistent increase in 2008 and 2009. We show that firms which were more exposed to the minimum wage increase faced higher increases in total labour costs and larger reductions in profitability. Intuitively, higher total labour costs driven by higher minimum wages directly reduce firm profits in the absence of price adjustments. We also show that the sharp increases in the minimum wage increased capital and decreased overall labour productivity and employment. The impact of policy is statistically significant only on capital.

Keywords: Minimum wage, firm profitability, Kaitz index, difference in differences
JEL classification: C21, J23, L25

Received: June 8, 2020; Revised: January 5, 2021; Accepted: February 18, 2021; Prepublished online: March 25, 2021; Published: August 31, 2021  Show citation

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Chorna, O. (2021). Firm-level Effects of Minimum Wages. Prague Economic Papers, 30(4), 402-425. doi: 10.18267/j.pep.773
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