Minimum wage and entrepreneurship: Evidence from China

This paper investigates the effects of minimum wage (MW) policies on entrepreneurship by using all contiguous county-pairs in China that straddle prefecture borders. We find that the MW significantly and negatively affects entrepreneurship, and the results are robust to a battery of tests based on different specifications. A plausible mechanism might be the crowd-out effect of increase of labor cost, given that our findings are particularly strong in labor-intensive industries, in areas with higher labor costs or low-level access to finance. Overall, this study highlights the negative effects of minimum wage labor policy on entrepreneurship, which have yet to be fully understood. (c) 2021 Elsevier B.V. All rights reserved.