|Author Name||MORIKAWA Masayuki (Vice Chairman & Vice President, RIETI)
|Creation Date/NO.||March 2013 13-J-011|
|Research Project||Reform of Labor Market Institutions
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This paper, using prefecture level panel data, empirically analyzes 1) the recent evolution of price-adjusted regional minimum wages and 2) the effects of minimum wages on firm profitability. As a result of rapid increases in minimum wages in the metropolitan areas since 2007, the regional disparity of nominal minimum wages has been widening. However, the disparity of price-adjusted minimum wages has been shrinking. According to the analysis of the effects of minimum wages on profitability using firm level panel data, higher minimum wages reduce firms' profit rate. This negative effect of minimum wages on profitability is pronounced among firms of lower mean wage levels. The results suggest that overinflated minimum wages may adversely affect regional economic activities.