VGSF - WU Vienna - LC

Nathalie Moyen, Leeds School of Business

online via Zoom 17:30 - 18:45

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Nath­alie Moyen from Leeds School of Busi­ness to present her re­search pa­per.
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Up­stream Volat­il­ity Spillovers from Geo­graph­ic­ally Con­cen­trated Pro­duc­tion

As US in­come inequal­ity in­creased, labor-in­tens­ive pro­duc­tion be­came more con­cen­trated into lower­-wage re­gions.  While eco­nom­ic­ally prof­it­able, the higher con­cen­tra­tion can lead to more volat­ile firm out­comes.  Us­ing fed­er­ally-­man­dated min­imum wage in­creases as a quasi-nat­ural ex­per­i­ment, we show that the in­crease in the fed­eral min­imum wage in states where the state min­imum is bound to the fed­eral man­date tem­pers the con­cen­tra­tion.  As a res­ult, the profit volat­il­it­ies of down­stream firms in treated states de­crease. We find that a one dol­lar in­crease in the fed­eral min­imum wage leads to a 3.63 per­cent­age point de­crease in pro­duc­tion con­cen­tra­tion in bound states, which is then as­so­ci­ated with a 24.4% de­crease in profit volat­il­ity of cus­tomer firms in those states. Our find­ings high­light the volat­il­ity spillover cost born by cus­tomer firms de­pend­ent on geo­graph­ic­ally con­cen­trated pro­duc­tion.

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