Minimum wage and financially distressed firms: Another one bites the dust

• Autor(a) principal: Alexandre, F.
• Data de Publicação: 2022
• Outros Autores: Bação, P., Cerejeira, J., Costa, H., Portela, M.
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10316/96945; https://doi.org/10.1016/j.labeco.2021.102088
• topic: Financially distressed firms; JEL classification J38; JEL classification L25; Minimum wages; Productivity

Since late 2014, Portuguese Governments adopted ambitious minimum wage policies. Using linked employer-employee data, we provide an econometric evaluation of the impact of those policies. Our estimates suggest that minimum wage increases reduced employment growth and profitability, in particular for financially distressed firms. We also conclude that minimum wage increases had a positive impact on firms’ exit, again amplified for financially distressed firms. According to these results, minimum wage policies may have had a supply side effect by accelerating the exit of low profitability and low productivity firms and, thus, contributing to improve aggregate productivity through a cleansing effect.