Minimum Wage and Corporate Policy

66 Pages Posted: 10 Feb 2017 Last revised: 13 Nov 2018

See all articles by Matthew Gustafson

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Jason D. Kotter

Brigham Young University - Department of Finance

Date Written: November 2018

Abstract

Using cross-state and intertemporal variation in whether a state’s minimum wage is bound by the federal minimum wage, we provide evidence that minimum wage increases lead firms in minimum wage sensitive industries (i.e., retail, restaurant, and entertainment) to scale down relative to a control group of non-labor-intensive firms. This scaling down effect manifests via less total investment, less capital and mergers and acquisitions expenditures, and more negative total asset and establishment growth. We find no evidence that minimum wage changes affect research and development and little evidence of any significant effects outside of the most minimum wage sensitive industries.

Keywords: minimum wage, investment, capital expenditures, acquisitions

JEL Classification: G31, G32, G38, J38

Suggested Citation

Gustafson, Matthew and Kotter, Jason D., Minimum Wage and Corporate Policy (November 2018). Available at SSRN: https://ssrn.com/abstract=2914598 or http://dx.doi.org/10.2139/ssrn.2914598

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Jason D. Kotter (Contact Author)

Brigham Young University - Department of Finance ( email )

United States

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