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<p>Resource allocation within firms is essential for their growth. We investigate how labor costs affect firms’ internal spatial distributions (ISDs) by using Chinese administrative data. We find that the increase in the minimum wage promotes firms to open establishments in regions with lower minimum wage. Our baseline results are robust after conducting various robustness checks. Our study also shows the minimum wage effects are greater for sectors where robots are more difficult to apply, private firms, those not in western regions. Our study provides micro-evidence for how firms respond to rising labor costs by changing their ISDs.</p>

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Labor costs and firms’ internal spatial distributions: evidence from China

  • 期刊论文

  • 出版模式：

    开放获取

  • 发表日期：

    2026年2月2日

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  • Ken Cheng,
  • Mengxu Xiong

摘要

Resource allocation within firms is essential for their growth. We investigate how labor costs affect firms’ internal spatial distributions (ISDs) by using Chinese administrative data. We find that the increase in the minimum wage promotes firms to open establishments in regions with lower minimum wage. Our baseline results are robust after conducting various robustness checks. Our study also shows the minimum wage effects are greater for sectors where robots are more difficult to apply, private firms, those not in western regions. Our study provides micro-evidence for how firms respond to rising labor costs by changing their ISDs.