English, Article, Journal or magazine article edition: Location Decisions and Minimum Wages Isabelle Méjean; Isabelle Mejean; Lise Patureau

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Bookmark: http://trove.nla.gov.au/version/159161
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Location Decisions and Minimum Wages
Author
  • Isabelle Méjean
  • Isabelle Mejean
  • Lise Patureau
Physical Description
  • preprint
Notes
  • The paper contributes to the living debate on the controversial effects of minimum wage policy on economic performances, focusing on its impact on firms’ location choice. The question is investigated through a theoretical model, that incorporates features from the new trade literature (Krugman (1991)) and the labor-market literature. In a two-country framework, we model endogenous entry of firms under wage rigidity. In this setting, the impact of an unilateral increase in the home country’s minimum wage is analyzed. The policy shock is shown to have a twofold influence on the relative attractiveness of the home country, simultaneously affecting its relative cost competitiveness and the aggregate demand addressed to firms. Both effects do not necessarily go in the same direction, hence the final effect on firms’ location decisions is ambiguous. We show that it notably depends on the adjustments that occur on the skilled and unskilled labor markets. Our overall results suggest that the design of labor-market policies should take into account their impact on firms’ location decisions, if willing to evaluate their whole consequences in the national economy.
  • RePEc:ema:worpap:2008-06
  • The paper contributes to the living debate on the controversial effects of minimum wage policy on economic performances, focusing on its impact on firms’ location choice. The question is investigated through a theoretical model, that incorporates features from the new trade literature (Krugman (1991)) and the labor-market literature. In a two-country framework, we model endogenous entry of firms under wage rigidity. In this setting, the impact of an unilateral increase in the home country’s minimum wage is analyzed. The policy shock is shown to have a twofold influence on the relative attractiveness of the home country, simultaneously affecting its relative cost competitiveness and the aggregate demand addressed to firms. The final effect on firms’ location decisions notably depends on the way skilled and unskilled labor markets adjust. Our overall results suggest that the impact of labor-market policies on firms’ location decisions have to be taken into account when evaluating their whole consequences in the national economy.
  • Minimum wage; home market effect; firms location decisions; wages
  • RePEc:cii:cepidt:2007-16
Language
  • English
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