Looking for a Needle in a Haystack? A Re-examination of the Time Series Relationship between Teenage Employment and Minimum Wages in the United States
AbstractThe work of Card and Krueger has cast doubt on the nature of the relationship between the minimum wage and teenage employment in the United States. The earlier "consensus" finding of a small but statistically significant negative effect was based on time series data whereas Card and Krueger's findings are based mainly on cross section data. In this article, we re-examine the time series relationship between minimum wage and teenage employment. We find that previous models break down due to their inability to capture changes in the trend, cyclical and seasonal components of teenage employment. We propose an alternative approach in which these components are treated as stochastic components and which contains the traditional, deterministic approach as a special case. The model when estimated up to 1979 accurately predicts what happens to teenage employment subsequently, when the minimum wage was frozen after 1981 and then increased quite substantially in the early 1990s. Moreover, we find that there is a significant, negative effect of the minimum wage on teenage employment and its size has hardly changed during the 1980s and early 1990s. Copyright 2002 by Blackwell Publishing Ltd
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Bibliographic InfoArticle provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.
Volume (Year): 64 (2002)
Issue (Month): 0 (Supplement)
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- Stephen Bazen & Velayoudom Marimoutou, 2002. "Looking for a Needle in a Haystack? A Re-examination of the Time Series Relationship between Teenage Employment and Minimum Wages in the United States," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(s1), pages 699-725, 08.
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- David Neumark & William Wascher, 2006.
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12663, National Bureau of Economic Research, Inc.
- David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," Working Papers 060708, University of California-Irvine, Department of Economics, revised Jan 2007.
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IZA Discussion Papers
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- Wang-Sheng Lee & Sandy Suardi, 2008. "Minimum Wages and Employment: Reconsidering the Use of a Time-Series Approach as an Evaluation Tool," Melbourne Institute Working Paper Series wp2008n20, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- Pandelis Mitsis, 2012. "Effects of minimum wages on total employment where the legislative coverage is limited: Evidence from Cyprus time series data," University of Cyprus Working Papers in Economics 05-2012, University of Cyprus Department of Economics.
- Margherita Comola & Luiz de Mello, 2009. "How Does Decentralised Minimum-Wage Setting Affect Unemployment and Informality?: The Case of Indonesia," OECD Economics Department Working Papers 710, OECD Publishing.
- Stephen Bazen & Velayoudom Marimoutou, 2000. "Looking for a Needle in a Haystack? A Structural Time Series Model of the Relationship Between Teenage Employment and Minimum Wages in the United States," Econometric Society World Congress 2000 Contributed Papers 0495, Econometric Society.
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