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| Minimum Wage and OFDI of Chinese Firms |
| LI Lei1,2,YU Mingyan3,XIAN Guoming2,4 |
1. Center for Transnationals’ Studies, Nankai University
2. School of Economics, Nankai university
3. Economics Department, Tianjin Administrative Institute
4. Center for Transnationals’Studies, Nankai University
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Abstract In the background of Chinese rapid growing labor cost and OFDI, this paper theoretically and empirically examines the relationship between changes in the minimum wage and firms’ OFDI behavior in China using detailed firm-level data of medium and large manufacturing enterprises. A theoretical model was built to analyze the mechanism. Empirical results find that a 1% increase in the log value of the minimum wage is associated with a 1.943 percentage-point increase in the times of OFDI. We further observe a larger decline among firms with lower average wage. The minimum wage effect is more pronounced for firms with OFDI motive as R&D type or vertical production type. Finally, the impact of the minimum wage on OFDI will change over time. In the several years after the implementation of the minimum wage law in 2004, the impact of minimum wage on OFDI is the greatest, and then gradually decreases. This article provides references for the policy making concerning the firm’s OFDI and labor cost rise in China.
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Received: 21 January 2018
Published: 15 August 2018
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Corresponding Authors:
LI Lei
E-mail: nklilei@163.com
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2018, Vol. 38 
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