The Impact of Minimum Wage Introduction on Characteristics of New Establishments: Evidence from South Korea

Abstract

This paper examines whether imposing minimum wage alters the characteristics of new businesses. Applying a difference-in-differences framework to repeated cross-sectional data of new plants, we explore the impact of minimum wage introduction on characteristics of new plants in South Korea. We first confirm that the minimum wage introduction induced new plants to have higher remuneration to workers. Due to the imposed minimum wage, the new plants tend to start with fewer employees and to equip their employees with more capital. Finally, we find that the minimum wage introduction led to higher labor productivity among entering plants.