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Minimum Wages and Employment: Reconsidering the Use of a Time-Series Approach as an Evaluation Tool

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Author Info
Wang-Sheng Lee () (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
Sandy Suardi (Department of Economics and Finance, La Trobe University)

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Abstract

The time-series approach used in the minimum wage literature essentially aims to estimate a treatment effect of increasing the minimum wage. In this paper, we employ a novel approach based on aggregate time-series data that allows us to determine if minimum wage changes have significant effects on employment. This involves the use of tests for structural breaks as a device for identifying discontinuities in the data which potentially represent treatment effects. In an application based on Australian data, the tentative conclusion is that the introduction of minimum wage legislation in Australia in 1997 and subsequent minimum wage increases appear not to have had any significant negative employment effects for teenagers.

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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2008n20.

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Length: 33 pages
Date of creation: Oct 2008
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Handle: RePEc:iae:iaewps:wp2008n20

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  1. Williams, Nicolas & Mills, Jeffrey A, 2001. "The Minimum Wage and Teenage Employment: Evidence from Time Series," Applied Economics, Taylor and Francis Journals, vol. 33(3), pages 285-300, February. [Downloadable!] (restricted)
  2. Peter Fredriksson & Per Johansson, 2003. "Program Evaluation and Random Program Starts," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  3. 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)
  4. Stephen Bazen & Velayoudom Marimoutou, 2002. "Looking for a Needle in a Haystack? A Re-examination of the Time Series Relationship between Teenage Employment and Minimum Wages in the United States," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(s1), pages 699-725, 08. [Downloadable!] (restricted)
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  5. Park, Jaehwan & Ratti, Ronald A, 1998. "Stationary Data and the Effect of the Minimum Wage on Teenage Employment," Applied Economics, Taylor and Francis Journals, vol. 30(4), pages 435-40, April. [Downloadable!] (restricted)
  6. Bai, Jushan, 1997. "Estimating Multiple Breaks One at a Time," Econometric Theory, Cambridge University Press, vol. 13(03), pages 315-352, June. [Downloadable!]
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  7. Ian Watson, 2004. "Minimum Wages and Employment: Comment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(2), pages 166-172, 06. [Downloadable!] (restricted)
  8. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
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  9. Lechner, Michael, 1999. "Earnings and Employment Effects of Continuous Off-the-Job Training in East Germany after Unification," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 74-90, January.
  10. Anne Morrison Piehl & Suzanne J. Cooper & Anthony A. Braga & David M. Kennedy, 2003. "Testing for Structural Breaks in the Evaluation of Programs," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 550-558, 09. [Downloadable!] (restricted)
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  11. Andrew Leigh, 2007. "Does Raising the Minimum Wage Help the Poor?," The Economic Record, The Economic Society of Australia, vol. 83(263), pages 432-445, December. [Downloadable!] (restricted)
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  12. Harding, Don & Harding, Glenys, 2004. "Minimum wages in Australia: an analysis of the impact on small and medium sized businesses," MPRA Paper 25, University Library of Munich, Germany. [Downloadable!]
  13. Michael Lechner, 2006. "Matching Estimating of Dynamic Treatment Models: Some Practical Issues," University of St. Gallen Department of Economics working paper series 2006 2006-03, Department of Economics, University of St. Gallen. [Downloadable!]
  14. Andrew Leigh, 2003. "Employment Effects of Minimum Wages: Evidence from a Quasi-Experiment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(4), pages 361-373. [Downloadable!] (restricted)
  15. Michael Lechner & Ruth Miquel, 2005. "Identification of the Effects of Dynamic Treatments by Sequential Conditional Independence Assumptions," University of St. Gallen Department of Economics working paper series 2005 2005-17, Department of Economics, University of St. Gallen. [Downloadable!]
  16. David Neumark & William Wascher, 2007. "Minimum Wages and Employment," IZA Discussion Papers 2570, Institute for the Study of Labor (IZA). [Downloadable!]
  17. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July. [Downloadable!] (restricted)
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