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The Effect of the Minimum Wage on Shareholder Wealth

Author

Listed:
  • David Card

    (Princeton University)

  • Alan B. Krueger

    (Princeton University)

Abstract

This paper presents a series of event studies that measure the stock market reaction to news about the minimum wage. We use two samples of firms: a broad sample of companies in low-wage industries; and a narrow sample of firms that mentioned the cost effects of the federal minimum wage in their recent annual reports. Our analysis of legislative events leading up to the 1989 amendments to the Fair Labor Standards Act shows little systematic effect on the market value of low-wage companies. We also analyze a series of events associated with a confidential memo from the Secretary of Labor that was leaked in mid-1993. Here, the stock market reactions suggest that news of a possible change in the minimum wage may have a modest effect on value of low-wage companies.

Suggested Citation

  • David Card & Alan B. Krueger, 1994. "The Effect of the Minimum Wage on Shareholder Wealth," Working Papers 716, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:337
    as

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    Citations

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    Cited by:

    1. Sherrilyn Billger, 2007. "The Heterogeneous Effect of the Passage of the Occupational Safety and Health Act on Stock Returns," Journal of Labor Research, Springer, vol. 28(3), pages 536-551, July.
    2. Jerome Adda & Samuel Berlinski & V. Bhaskar & Stephen Machin, 2009. "Market regulation and firm performance: the case of smoking bans in the UK," IFS Working Papers W09/13, Institute for Fiscal Studies.
    3. Jérôme Adda & Samuel Berlinski & Stephen Machin, 2012. "Market Regulation and Firm Performance: The Case of Smoking Bans in the United Kingdom," Journal of Law and Economics, University of Chicago Press, vol. 55(2), pages 365-391.
    4. International Monetary Fund, 2016. "Cross-Country Report on Minimum Wages: Selected Issues," IMF Staff Country Reports 2016/151, International Monetary Fund.

    More about this item

    Keywords

    minimum wage; event study; stock market valuation;
    All these keywords.

    JEL classification:

    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
    • B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925

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