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Stationary data and the effect of the minimum wage on teenage employment

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  • Jaehwan Park
  • Ronald Ratti

Abstract

One of the interesting features of time series work on the effect of the minimum wage is that the problem of possible spurious regressions when data may be non-stationary has been largely ignored. It is shown that this is potentially a serious problem. It is found that although the teenage employment to population ratio is stationary, the 'independent' variables in time series regression equations are non-stationary. Substitution of the stationary first differences of the independent variables in the regression equations for their levels, is found to greatly undermine the estimated influence of the minimum wage on the employment-to-population ratio. Estimates of the effect of the minimum wage are found to be only marginally more significant when seasonal differencing of the dependent variable and an ARCH estimation technique are employed.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 30 (1998)
Issue (Month): 4 ()
Pages: 435-440

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Handle: RePEc:taf:applec:v:30:y:1998:i:4:p:435-440

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Cited by:
  1. 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.
  2. Sara Lemos, 2004. "Anticipated Effects of the Minimum Wage on Prices," Discussion Papers in Economics 04/25, Department of Economics, University of Leicester.
  3. Chuang, Yih-Chyi, 2006. "The Effect of Minimum Wage on Youth Employment and Unemployment in Taiwan," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 47(2), pages 155-167, December.

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