Minimum Wages, State Ownership, and Corporate Environmental Policies
2025 · Published in Journal of Financial and Quantitative Analysis 60(6): 2921–2951 · DOI 10.1017/S0022109024000644
PDF of Minimum Wages, State Ownership, and Corporate Environmental Policies
In one sentence
Minimum wage increases lead industrial firms to pollute more and to cut abatement, and state ownership reduces these effects.
Summary
The paper studies how labour-market policy affects corporate environmental behaviour, using minimum wage discontinuities at county borders in China. Minimum wage increases lead industrial firms to pollute more and reduce abatement efforts. State ownership mitigates these effects, consistent with state owners internalising the externality, and the effects are weaker after provinces raise pollution discharge fees. The effects are stronger for firms more sensitive to minimum wages, with less market power or tighter financial constraints, and for subsidiaries of non-listed companies. The results show an unintended environmental consequence of labour-market policy.
Abstract as published
Exploring the minimum wage policy discontinuities at county borders, we find that minimum wage hikes induce industrial firms to pollute more and reduce their abatement efforts. State ownership mitigates these negative effects, suggesting its role in addressing externality. The adverse environmental impacts are attenuated by the staggered increase in pollution discharge fees across provinces. These effects are stronger for firms with higher minimum wage sensitivity, lower market power, and greater financial constraints, and for firms that are the subsidiaries of nonlisted companies. Overall, our findings highlight the unintended environmental consequences of labor market policies.
Citation
Tao Chen, Xi Xiong, Kunru Zou (2025). Minimum Wages, State Ownership, and Corporate Environmental Policies. Journal of Financial and Quantitative Analysis, 60(6), 2921–2951. https://doi.org/10.1017/S0022109024000644
BibTeX
@article{chen2025minimum,
title = {{Minimum Wages, State Ownership, and Corporate Environmental Policies}},
author = {Tao Chen and Xi Xiong and Kunru Zou},
journal = {Journal of Financial and Quantitative Analysis},
year = {2025},
volume = {60},
number = {6},
pages = {2921--2951},
doi = {10.1017/S0022109024000644}
}