Trade and minimum wages in general equilibrium: Theory and evidence

This paper develops a new model with heterogeneous firms under perfect competition in Heckscher-Ohlin setting. We derive novel prediction regarding the effect of minimum wages on selection, namely that binding wage will raise (or lower) TFP at firm and industry level depending whether capital intensity entry costs exceeds (falls short of) production. Exploiting rich regional variation across Chinese counties using production data, we find robust evidence support causal effects consistent our theoretical predictions.