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Minimum Wage and Individual Worker Productivity: Evidence from a Large US Retailer

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  • Decio Coviello
  • Erika Deserranno
  • Nicola Persico

Abstract

We study workers who are employed by a large US retailer, work in many store locations, and are paid based on performance. By means of a border-discontinuity analysis, we document that workers become more productive and are terminated less often after a minimum wage increase. These effects are stronger among workers whose pay is more often supported by the minimum wage. However, when workers are monitored less intensely, the minimum wage depresses productivity. We interpret these findings through an efficiency wage model. After a minimum wage increase, profits decrease, and a calibration exercise suggests that worker welfare increases.

Suggested Citation

  • Decio Coviello & Erika Deserranno & Nicola Persico, 2022. "Minimum Wage and Individual Worker Productivity: Evidence from a Large US Retailer," Journal of Political Economy, University of Chicago Press, vol. 130(9), pages 2315-2360.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/720397
    DOI: 10.1086/720397
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    Cited by:

    1. Wang, Maolin & Lin, Huiting & Huang, Yehua & Lu, Huiyan, 2023. "Poverty alleviation and firm productivity: Evidence from China's minimum wage system," International Review of Financial Analysis, Elsevier, vol. 87(C).
    2. Hill, Seth J, 2023. "Minimum Wages and Homelessness," OSF Preprints z2fqj, Center for Open Science.
    3. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    4. Nicolás Abbate & Bruno Jiménez, 2023. "Do Minimum Wage Hikes Lead to Employment Destruction? Evidence from a Regression Discontinuity Design in Argentina," CEDLAS, Working Papers 0310, CEDLAS, Universidad Nacional de La Plata.
    5. Meiselbach, Mark K. & Abraham, Jean M., 2023. "Do minimum wage laws affect employer-sponsored insurance provision?," Journal of Health Economics, Elsevier, vol. 92(C).
    6. Arabzadeh, Hamzeh & Balleer, Almut & Gehrke, Britta & Taskin, Ahmet Ali, 2024. "Minimum wages, wage dispersion and financial constraints in firms," European Economic Review, Elsevier, vol. 163(C).
    7. Matthew T. Gustafson & Jason D. Kotter, 2023. "Higher Minimum Wages Reduce Capital Expenditures," Management Science, INFORMS, vol. 69(5), pages 2933-2953, May.
    8. Arabzadeh, Hamzeh & Balleer, Almut & Gehrke, Britta & Taskin, Ahmet Ali, 2024. "Minimum wages, wage dispersion and financial constraints in firms," European Economic Review, Elsevier, vol. 163(C).

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