Do Firms Exit the Formal Economy after a Minimum Wage Hike? Quasi-Experimental Evidence from Turkey

Acar, Aysenur ; Bossavie, Laurent ; Makovec, Mattia

World Bank, Washington, DC

关键词: MINIMUM WAGE;    EDUCATIONAL ATTAINMENT;    POVERTY;    LABOR PRODUCTIVITY;    FIRM BEHAVIOR;   

DOI  :  10.1596/1813-9450-8749
RP-ID  :  WPS8749

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper explores the effects of alarge increase in the national minimum wage in Turkey onfirms’ exit rates from the formal economy. The analysisexploits a unique, linked employer-employee panel data setof the universe of registered firms in all sectors of theeconomy. The causal impact of the minimum wage hike isestimated by using pre-policy information on the fulldistribution of wages in registered firms as a measure ofexposure to treatment, and by implementing adifference-in-difference estimation strategy. The minimumwage hike is found to increase firms’ exit rates from theformal economy by 12 percent. This suggests that firm exitsattributable to the minimum wage hike could account for upto one-third of the total formal employment destruction thatoccurred between 2015 and 2016. The minimum wage effect onexit rates is found to be larger among firms with lowproductivity levels before the policy change, and in sectorswhere profit margins are low. A range of placebo tests androbustness checks indicate that these findings are notdriven by trends in unobservable characteristics correlatedwith exposure to the minimum wage hike.