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The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment

Listed author(s):
  • David H. Autor
  • Alan Manning
  • Christopher L. Smith

We reassess the effect of minimum wages on US earnings inequality using additional decades of data and an IV strategy that addresses potential biases in prior work. We find that the minimum wage reduces inequality in the lower tail of the wage distribution, though by substantially less than previous estimates, suggesting that rising lower tail inequality after 1980 primarily reflects underlying wage structure changes rather than an unmasking of latent inequality. These wage effects extend to percentiles where the minimum is nominally nonbinding, implying spillovers. We are unable to reject that these spillovers are due to reporting artifacts, however. (JEL J22, J31, J38, K31)

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Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 8 (2016)
Issue (Month): 1 (January)
Pages: 58-99

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Handle: RePEc:aea:aejapp:v:8:y:2016:i:1:p:58-99
Note: DOI: 10.1257/app.20140073
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  1. Acemoglu, Daron & Autor, David, 2011. "Skills, Tasks and Technologies: Implications for Employment and Earnings," Handbook of Labor Economics, Elsevier.
  2. Teulings, Coen N, 2000. "Aggregation Bias in Elasticities of Substitution and the Minimum Wage Paradox," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 359-398, May.
  3. Thomas Lemieux, 2008. "The changing nature of wage inequality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(1), pages 21-48, January.
  4. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
  5. Victor Chernozhukov & Christian Hansen, 2005. "An IV Model of Quantile Treatment Effects," Econometrica, Econometric Society, vol. 73(1), pages 245-261, 01.
  6. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
  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. David Neumark & JM Salas & William Wascher, 2014. "More on recent evidence on the effects of minimum wages in the United States," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-26, December.
  9. Dube, Arindrajit & Giuliano, Laura & Leonard, Jonathan, 2015. "Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior," IZA Discussion Papers 9149, Institute for the Study of Labor (IZA).
  10. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  11. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
  12. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
  13. repec:cbo:report:44995 is not listed on IDEAS
  14. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
  15. Alan B. Krueger & David Card, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply," American Economic Review, American Economic Association, vol. 90(5), pages 1397-1420, December.
  16. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
  17. David Card & Lawrence F. Katz & Alan B. Krueger, 1993. "An Evaluation of Recent Evidence on the Employment Effects of Minimum and Subminimum Wages," NBER Working Papers 4528, National Bureau of Economic Research, Inc.
  18. Coen N. Teulings, 2003. "The contribution of minimum wages to increasing wage inequality," Economic Journal, Royal Economic Society, vol. 113(490), pages 801-833, October.
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