Trade and minimum wages in general equilibrium: Theory and evidence

Xue Bai, Arpita Chatterjee, Kala Krishna, Hong Ma

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


This paper develops a new model with heterogeneous firms under perfect competition in a Heckscher-Ohlin setting. We derive a novel prediction regarding the effect of minimum wages on selection, namely that a binding minimum wage will raise (or lower) TFP at the firm and industry level depending on whether the capital intensity of entry costs exceeds (falls short of) that of production. Exploiting rich regional variation in minimum wages across Chinese counties and using firm level production data, we find robust evidence in support of causal effects of minimum wages consistent with our theoretical predictions.

Original languageEnglish (US)
Article number103535
JournalJournal of International Economics
StatePublished - Nov 2021

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


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