Minimum Wages, State Ownership, and Corporate Environmental Policies

This study examines how minimum wage hikes affect firms’ industrial pollution. Using the establishment-level pollutant emission data on Chinese industrial firms and exploring the minimum wage policy discontinuities at county borders, we find that minimum wage hikes induce firms to pollute more and reduce their abatement efforts. In particular, a 10% increase in minimum wage corresponds to a 4.63% increase in COD emissions. State ownership mitigates the negative impact of minimum wages on pollutant emissions, suggesting its role in addressing externality. The effects of minimum wages on pollutant emissions are stronger for financially constrained firms and firms with lower product market power, and higher labor intensity. These effects are attenuated with the staggered increase of pollution fee charges across provinces. Overall, our findings highlight the unintended environmental consequences of labor market policies