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Do Frictions Matter in the Labor Market? Accessions, Separations, and Minimum Wage Effects

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  • Dube, Arindrajit
  • Lester, T. William
  • Reich, Michael

Abstract

We measure labor market frictions using a strategy that bridges design-based and structural approaches: estimating an equilibrium search model using reduced-form minimum wage elasticities identified from border discontinuities and fitted with Bayesian and LIML methods. We begin by providing the first test of U.S. minimum wage effects on labor market flows and find negative effects on employment flows, but not levels. Separations and accessions fall among restaurants and teens, especially those with low tenure. Our estimated parameters of a search model with wage posting and heterogeneous workers and firms imply that frictions help explain minimum wage effects.

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Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt4t3342nd.

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Date of creation: 24 Jun 2011
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Handle: RePEc:cdl:indrel:qt4t3342nd

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Keywords: J23; J32; J48; J63; Social and Behavioral Sciences;

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  1. Fabien Postel-Vinay & Giuseppe Moscarini, 2008. "The Timing of Labor Market Expansions: New Facts and a New Hypothesis," 2008 Meeting Papers 326, Society for Economic Dynamics.
  2. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The credibility revolution in empirical economics: how better research design is taking the con out of econometrics," LSE Research Online Documents on Economics 48898, London School of Economics and Political Science, LSE Library.
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  5. Pierre Brochu & David A. Green, 2013. "The Impact of Minimum Wages on Labour Market Transitions," Economic Journal, Royal Economic Society, vol. 123(12), pages 1203-1235, December.
  6. Pedro Portugal & Ana Rute Cardoso, 2006. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 988-1013, 09.
  7. Allegretto, Sylvia & Dube, Arindrajit & Reich, Michael, 2010. "Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data," Institute for Research on Labor and Employment, Working Paper Series qt7jq2q3j8, Institute of Industrial Relations, UC Berkeley.
  8. Chib, Siddhartha & Ramamurthy, Srikanth, 2010. "Tailored randomized block MCMC methods with application to DSGE models," Journal of Econometrics, Elsevier, vol. 155(1), pages 19-38, March.
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  21. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Aumentare i salari minimi non provoca disoccupazione. Evidenze empiriche dagli Stati Uniti
    by keynesblog in Keynes Blog on 2012-06-25 08:36:33
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Cited by:
  1. Depew, Briggs & Sorensen, Todd A., 2011. "Elasticity of Supply to the Firm and the Business Cycle," IZA Discussion Papers 5928, Institute for the Study of Labor (IZA).
  2. Bachmann, Ronald & König, Marion & Schaffner, Sandra, 2012. "Lost in Transition? Minimum Wage Effects on German Construction Workers," IZA Discussion Papers 6760, Institute for the Study of Labor (IZA).
  3. Fahn, Matthias, 2011. "Three Essays on Commitment and Information Problems," Munich Dissertations in Economics 13750, University of Munich, Department of Economics.
  4. Till van Treeck, 2012. "Did inequality cause the U.S. financial crisis?," IMK Working Paper 91-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  5. Isaac Sorkin, . "Are There Long-Run Effects of the Minimum Wage?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.

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