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City Minimum Wages and Spatial Equilibrium Effects

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  • Pérez Pérez Jorge

Abstract

This paper studies the effect of minimum wage changes on spatial equilibriums in local labor markets. Using data for the U.S. and minimum wage variation across state borders, I analyze how commuting, residence, and employment locations change in response to local minimum wage changes. I find that areas where the minimum wage increases receive fewer low-wage commuters. I formulate a spatial equilibrium model and calculate counterfactuals with a higher minimum wage for U.S. cities considering an increase. For small minimum wage increases, most counties would receive higher low-wage commuting and have fewer low-wage residents. As minimum wage increases are larger, there are higher low-wage commuting reductions driven by employment relocation.

Suggested Citation

  • Pérez Pérez Jorge, 2022. "City Minimum Wages and Spatial Equilibrium Effects," Working Papers 2022-04, Banco de México.
    • Handle: RePEc:bdm:wpaper:2022-04
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    Cited by:

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    More about this item

    Keywords

    Minimum wage; spatial equilibrium; local labor markets;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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