The Consumption Response to Minimum Wages: Evidence from Chinese Households

54 Pages Posted: 22 May 2017

See all articles by Ernest Dautović

Ernest Dautović

European Central Bank

Harald Hau

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Yi Huang

Graduate Institute of International and CEPR

Multiple version iconThere are 3 versions of this paper

Date Written: May 2017

Abstract

This paper evaluates the Chinese minimum wage policy for the period 2002-2009 in terms of its impact on low income household consumption. Using a representative household panel, we find support for the permanent income hypothesis, whereby unanticipated and persistent income increases due to minimum wage policy change are fully spent. The impact is driven by households with at least one child. We infer significant positive welfare effects for low income households based on expenditure increases concentrated in health care and education, whereas a negative employment effect of higher minimum wage cannot be confirmed.

Keywords: Household consumption, Labor income, minimum wage, Permanent income hypothesis

JEL Classification: C26, E24, J38

Suggested Citation

Dautović, Ernest and Hau, Harald and Huang, Yi, The Consumption Response to Minimum Wages: Evidence from Chinese Households (May 2017). CEPR Discussion Paper No. DP12057, Available at SSRN: https://ssrn.com/abstract=2971978

Ernest Dautović (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Harald Hau

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute

Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Yi Huang

Graduate Institute of International and CEPR ( email )

PO Box 136
Geneva, CH-1211
Switzerland

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