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Disentangling the Minimum Wage Puzzle: An Analysis of Job Accessions and Separations from a Longitudinal Matched Employer-Employee Data Set

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Author Info
Cardoso, Ana Rute
Portugal, Pedro

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Abstract

Changes in legislation in mid-80s Portugal provide remarkable conditions for economic analysis, as the minimum wage increased very sharply for a very specific group of workers. Relying on a matched employer-employee panel dataset, we model gross job flows - accessions and separations - in continuing firms, as well as in new firms and those going out of business, using a Poisson regression model applied to proportions. Worker behavior is as well modeled. Employment trends for teenagers, the affected group, are contrasted against older workers, before and after the rise in the youth minimum wage. The major effect on teenagers of a rising minimum wage is the reduction of separations from the employer, which compensates for the reduction of accessions (to new and continuing firms) and the rising dismissals from firms closing down. Indications that job attachment for low wage youngsters rises following an increase in their minimum wage suggest the relevance of supply side factors overcoming demand forces. In this sense, our results can reconcile some of the previous evidence that has been presented in the empirical literature when analysing the overall impact of the minimum wage on youth employment without looking at its sources.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2844.

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Date of creation: Jun 2001
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Handle: RePEc:cpr:ceprdp:2844

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Related research
Keywords: Employment; Minimum Wage;

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

References listed on IDEAS
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  2. Coen N. Teulings, 1998. "The Contribution of Minimum Wages to Increasing Wage Inequality," Tinbergen Institute Discussion Papers 98-093/3, Tinbergen Institute. [Downloadable!]
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  3. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Blackwell Publishing, vol. 42(3), pages 227-45, September. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
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  6. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," NBER Working Papers 3997, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. 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. [Downloadable!] (restricted)
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  8. Abowd, John M & Kramarz, Francis & Margolis, David N, 1999. "Minimum Wages and Employment in France and the United States," CEPR Discussion Papers 2159, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Guimaraes, Paulo & Mata, José & Portugal, Pedro, 1995. "The Survival of New Plants: Start-up Conditions and Post-entry Evolution," CEPR Discussion Papers 1203, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Dickens, Richard & Machin, Stephen & Manning, Alan, 1998. "Estimating the effect of minimum wages on employment from the distribution of wages: A critical view," Labour Economics, Elsevier, vol. 5(2), pages 109-134, June. [Downloadable!] (restricted)
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  11. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  12. Neumark, David & Wascher, William, 1995. "Minimum-Wage Effects on School and Work Transitions of Teenagers," American Economic Review, American Economic Association, vol. 85(2), pages 244-49, May. [Downloadable!] (restricted)
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  13. David Neumark, 1999. "The Employment Effects of Recent Minimum Wage Increases: Evidence from a Pre-specified Research Design," NBER Working Papers 7171, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Zavodny, Madeline, 2000. "The effect of the minimum wage on employment and hours," Labour Economics, Elsevier, vol. 7(6), pages 729-750, November. [Downloadable!] (restricted)
  15. Burkhauser, Richard V & Couch, Kenneth A & Wittenburg, David C, 2000. "A Reassessment of the New Economics of the Minimum Wage Literature with Monthly Data from the Current Population Survey," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 653-80, October. [Downloadable!] (restricted)
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  17. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-61, April.
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  18. Bell, David N F & Wright, Robert E, 1996. "The Impact of Minimum Wages on the Wages of the Low Paid: Evidence from the Wage Boards and Councils," Economic Journal, Royal Economic Society, vol. 106(436), pages 650-56, May. [Downloadable!] (restricted)
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  19. Neumark, David & Wascher, William, 1995. "Minimum Wage Effects on Employment and School Enrollment," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 199-206, April.
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  20. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September. [Downloadable!] (restricted)
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  21. Machin, Stephen & Manning, Alan, 1996. "Employment and the Introduction of a Minimum Wage in Britain," Economic Journal, Royal Economic Society, vol. 106(436), pages 667-76, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Anabela Botelho & Lígia Pinto, 2003. "Students' expectations of the economic returns to college education Results of a controlled experiment," Working Papers 27, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho. [Downloadable!]
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