The Distributional Impacts of Minimum Wage Increases When Both Labor Supply and Labor Demand Are Endogenous
AbstractWe develop and estimate a one-shot search model with endogenous firm entry, and therefore zero expected profits, and endogenous labor supply. Positive employment effects from a minimum wage increase can result as the employment level depends upon both the numbers of searching firms and workers. Welfare implications are similar to the classical analysis: workers who most want the minimum wage jobs are hurt by the minimum wage hike with workers marginally interested in minimum wage jobs benefiting. We estimate the model using CPS data on teenagers and show that small changes in the employment level are masking large changes in labor supply and demand. Teenagers from well-educated families see increases in their employment probabilities and push out their less-privileged counterparts from the labor market. This article has supplementary material online.
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Bibliographic InfoArticle provided by American Statistical Association in its journal Journal of Business and Economic Statistics.
Volume (Year): 29 (2011)
Issue (Month): 1 ()
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Other versions of this item:
- Tom Ahn & Peter Arcidiacono & Walter Wessels, 2011. "The Distributional Impacts of Minimum Wage Increases When Both Labor Supply and Labor Demand Are Endogenous," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 12-23, January.
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:CitEc Project, subscribe to its RSS feed for this item.
- Luca Flabbi and James Mabli, 2012.
"Household Search or Individual Search: Does It Matter? Evidence from Lifetime Inequality Estimates,"
gueconwpa~12-12-03, Georgetown University, Department of Economics.
- Flabbi, Luca & Mabli, James, 2012. "Household Search or Individual Search: Does It Matter? Evidence from Lifetime Inequality Estimates," IZA Discussion Papers 6908, Institute for the Study of Labor (IZA).
- Isaac Sorkin, .
"Are There Long-Run Effects of the Minimum Wage?,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics.
- Isaac Sorkin, 2014. "Code and data files for "Are There Long-Run Effects of the Minimum Wage?"," Computer Codes 13-225, Review of Economic Dynamics.
- Ahn, Tom, 2011. "Distributional impacts of a local living wage increase with ability sorting," Economics Letters, Elsevier, vol. 112(3), pages 283-286, September.
- Nicole Coomer & Walter Wessels, 2013. "The Effect of the Minimum Wage on Covered Teenage Employment," Journal of Labor Research, Springer, vol. 34(3), pages 253-280, September.
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