2026-05-24T21:40:47Zhttps://keep.lib.asu.edu/oai/requestoai:keep.lib.asu.edu:node-1553282024-12-20T18:25:12Zoai_pmh:alloai_pmh:repo_items155328
https://hdl.handle.net/2286/R.I.43981
http://rightsstatements.org/vocab/InC/1.0/
All Rights Reserved
2017
vii, 89 pages : color illustrations
Doctoral Dissertation
Academic theses
Text
eng
Cho, DuckKi
Bharath, Sreedhar
Hertzel, Michael
Bessembinder, Hendrik
Wang, Jiaxu
Arizona State University
Partial requirement for: Ph.D., Arizona State University, 2017
Includes bibliographial references (pages 52-56)
Field of study: Business administration
Firms reduce investment when facing downward wage rigidity (DWR), the inability or unwillingness to adjust wages downward. I construct DWR measures and exploit staggered state-level changes in minimum wage laws as an exogenous variation in DWR to document this fact. Following a minimum wage increase, firms reduce their investment rate by 1.17 percentage points. Surprisingly, this labor market friction enhances firm value and production efficiency when firms are subject to other frictions causing overinvestment, consistent with the theory of second best. Finally, I identify increased operating leverage and aggravation of debt overhang as mechanisms by which DWR impedes investment.
Finance
Labor Economics
Corporate Investment
Downward Wage Rigidity
Minimum Wage Laws
Theory of Second Best
Investments
Wages
Second best, Theory of
Corporations--Finance.
Minimum wage--Law and legislation.
Downward wage rigidity, corporate investment, and firm value