The paper makes several contributions to the minimum wage literature. First, it is one of very few papers to investigate firm responses going beyond employment cuts for a developing country.<sup>3</sup> Compared to the prior contributions that looked at firm-level responses to the minimum wage in developing economies (Hau, Huang, and Wang, 2016; Mayneris, Poncet, and Zhang, 2018), we take advantage of a very rich linked employer-employee dataset that enables us to link firm destruction to boarder employment and reallocation effects, as well as informality. Overall, our paper is also one of the very few in the minimum-wage literature to jointly examine impacts on both firm- and workerlevel outcomes, which has been even more rare for developing economies.<sup>4</sup> To the best of our knowledge, it is also the first paper to assess impacts on firm destruction for the universe of registered firms in the economy, including small firms which predominate in developing countries.<sup>5</sup> Compared to prior contributions, the granularity of the data allows us to shed light on heterogeneous effects across firm types – an area of study that is critical for understanding productivity and allocative efficiency – which may have been missed by prior contributions.

Our paper also contributes to the very thin literature on the efficiency gains and reallocation effects of the minimum wage. It is only the second paper to examine reallocations among workers as a result of the minimum wage by tracking workers who leave exiting firms, and it is the first to address this issue in a developing-country economy.<sup>6</sup> Our results suggest that productivity gains from the minimum wage in the formal sector emerge through the elimination of firms with low levels of productivity. However, these productivity gains are somewhat offset by a lack of worker reallocation into more-productive firms, at least in the short run. One year after the minimum-wage increase, a minority of workers from exiting firms were employed in formal firms, and indicative evidence suggests that most had exited the labor force or were unemployed.

The paper also shades new light on the long-standing debate on the employment effects of the minimum wage. To the best of our knowledge, this is the first paper to explicitly distinguish between employment effects originating from employment cuts made by surviving firms (the intensive margin),

> 3 To the best of our knowledge, recent exceptions are Mayneris, Poncet, and Zhang (2018), who focus on the impact of a minimum wage increase on value added, productivity, and profits in China. Hau, Huang, and Wang (2016) also examine the substitution of labor for capital by Chinese firms in response to the minimum wage.

> 4 To the best of our knowledge, the only recent paper using employer-employee linked dataset to look at the impacts of the minimum wage in the context of a developing economy is Engbom and Moser (2021), although their dataset does not include detailed information on firm outcomes as in this paper. In the context of an advanced economy, Dustmann et al. (2020) also look at the joint effects of the minimum wage on firms and workers.

> 5 Prior contributions looking at the minimum-wage impacts on firm exits are restricted to the restaurant industry in the US (Aaronson et al., 2018; Luca and Luca, 2019; Ashenfelter and Jurajda, 2021).

> 6 Dustmann et al. (2020) have recently looked at this question in the context of Germany.

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