Employment Effects of Minimum Wage in a Highly Competitive Labor Market : The Case of Foreign Domestic Helpers in Hong Kong

This paper examines the employment effects of minimum wage in a specific sector that corresponds closely to the notion of a competitive labor market, the foreign domestic helper market in Hong Kong. Our results show that a one percent increase in the minimum wage reduces 0.5 to 0.7 percent of employment in this sector. The estimated elasticity is relatively high, which aligns with the prediction that employment effects of minimum wage should be greater in a competitive labor market