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The unintended consequence of minimum wage hikes: Evidence based on firms' pollution emission

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  • Zhang, Ming-ang
  • Lu, Shuling
  • Zhang, Sihan
  • Bai, Yanfeng
Abstract
This study examines the impact of an unanticipated consequence of minimum wage hikes on firms' pollution emissions in China by exploiting policy discontinuities at county borders to control for spatial heterogeneity. Using a unique dataset that combines industrial firms' emission records and county-level minimum wages, we document this notable consequence: higher minimum wages raise pollution emission intensity of Chinese manufacturing firms—the SO2 and COD emission intensity elasticities with regard to minimum wages being 0.274 and 0.262, respectively. The increased pollution intensity mainly results from the high consumption of dirty energy, insufficient pollution treatment facilities, and a failure in green technology upgrading. Furthermore, the pollution response is more pronounced in financially constrained firms as well as firms in more competitive and labor-intensive industries, while stringent environmental regulation somewhat alleviates this effect.

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  • Zhang, Ming-ang & Lu, Shuling & Zhang, Sihan & Bai, Yanfeng, 2023. "The unintended consequence of minimum wage hikes: Evidence based on firms' pollution emission," Energy Economics, Elsevier, vol. 125(C).
    • Handle: RePEc:eee:eneeco:v:125:y:2023:i:c:s0140988323003559
    DOI: 10.1016/j.eneco.2023.106857
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    More about this item

    Keywords

    Minimum wage; Pollution emission; Discontinuities at county borders;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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