Minimum Wage and Productivity: Evidence from Chilean Manufacturing Plants

This paper analyzes the effects of the minimum wage on a firm’s productivity. The main hypothesis is that an increase in the minimum wage has a negative effect on total factor productivity (TFP) due to the existence of labor adjustment costs. Using data from Chilean manufacturing plants for the period 1992–2005 and a difference-in-differences methodology, we find that an increase in minimum wage had a negative effect on TFP. Our estimates...