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Estimating the Effect of Minimum Wages on Employment from the Distribution of Wages: A Critical View

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  • Richard Dickens
  • Stephen Machin
  • Alan Manning

Abstract

In two papers, Meyer and Wise (1983a,b) present an ingenious method for estimating the effect of minimum wage rates on wages and employment using data based only on the observed cross-sectional distribution of wages. They, and others who have used this method, have generally found that the minimum wage causes substantial losses in employment. In this paper we evaluate the robustness of this technique. We argue that the estimates, at least for the UK, are very sensitive to the functional form assumed for the distribution of wages and to the assumption made about how far up the wage distribution the minimum wage has spillover effects.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0203.

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Date of creation: Aug 1994
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Handle: RePEc:cep:cepdps:dp0203

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Kaufman, Roger T, 1989. "The Effects of Statutory Minimum Rates of Pay on Employment in Great Britain," Economic Journal, Royal Economic Society, vol. 99(398), pages 1040-53, December.
  2. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," NBER Working Papers 4058, National Bureau of Economic Research, Inc.
  3. Lawrence Katz & Alan Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Working Papers 678, Princeton University, Department of Economics, Industrial Relations Section..
  4. David Card & Alan B. Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," NBER Working Papers 4509, National Bureau of Economic Research, Inc.
  5. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January.
  6. McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May.
  7. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  8. Charles Brown & Curtis Gilroy & Andrew Kohen, 1982. "The Effect of the Minimum Wage on Employment and Unemployment: A Survey," NBER Working Papers 0846, National Bureau of Economic Research, Inc.
  9. Meyer, Robert H & Wise, David A, 1983. "Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth," Econometrica, Econometric Society, vol. 51(6), pages 1677-98, November.
  10. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
  11. repec:fth:prinin:315 is not listed on IDEAS
  12. David Neumark & William Wascher, 1992. "Employment effects of minimum and subminimum wages: Panel data on state minimum wage laws," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
  13. repec:fth:prinin:298 is not listed on IDEAS
  14. Stephen Machin & Alan Manning, 1994. "The effects of minimum wages on wage dispersion and employment: Evidence from the U.K. Wages Councils," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(2), pages 319-329, January.
  15. Meyer, Robert H & Wise, David A, 1983. "The Effects of the Minimum Wage on the Employment and Earnings of Youth," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 66-100, January.
  16. Van Soest, A. & Kapteyn, A., 1989. "The Impact Of Minimum Wage Regulations On Employment And The Wage Rate Distribution," Papers 8947, Tilburg - Center for Economic Research.
  17. Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-70, September.
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