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The Effect of Minimum Wages on Labour Market Outcomes: County-Level Estimates from the Restaurant-and-Bar Sector

  • John T. Addison
  • McKinley L. Blackburn
  • Chad D. Cotti

We use county-level data on employment and earnings in the restaurant-and-bar sector to evaluate the impact of minimum wage changes on low-wage labor markets. Our empirical approach is similar to the literature that has used state-level panel data to estimate minimum-wage impacts, with the difference that we focus on a particular sector rather than demographic group. Our estimated models are consistent with a simple competitive model of the restaurant-and-bar labor market in which supply-and-demand factors affect both the equilibrium outcome and the probability that a minimum wage will be binding in any given time period. Our evidence does not suggest that minimum wages reduce employment in the overall restaurant-and-bar sector, after controls for trends in sector employment at the county level are incorporated in the model. Employment in this sector appears to exhibit a downward long-term trend in states that have increased their minimum wages relative to states that have not, thereby predisposing fixed-effects estimates towards finding negative employment effects.

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File URL: http://hdl.handle.net/10.1111/j.1467-8543.2010.00819.x
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Article provided by London School of Economics in its journal British Journal of Industrial Relations.

Volume (Year): 50 (2012)
Issue (Month): 3 (09)
Pages: 412-435

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Handle: RePEc:bla:brjirl:v:50:y:2012:i:3:p:412-435
DOI: j.1467-8543.2010.00819.x
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  1. Neumark, David & Wascher, William, 2007. "Minimum Wages, the Earned Income Tax Credit, and Employment: Evidence from the Post-Welfare Reform Era," IZA Discussion Papers 2610, Institute for the Study of Labor (IZA).
  2. Stephen G. Donald & Kevin Lang, 2007. "Inference with Difference-in-Differences and Other Panel Data," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 221-233, May.
  3. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
  4. 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.
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  6. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
  7. Stephen Bazen & Julie Le Gallo, 2009. "The Differential Impact Of Federal And State Minimum Wages On Teenage Employment," Working Papers halshs-00382509, HAL.
  8. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
  9. David Card, 1992. "Do Minimum Wages Reduce Employment? A Case Study of California, 1987–89," ILR Review, Cornell University, ILR School, vol. 46(1), pages 38-54, October.
  10. David Neumark & William Wascher, 1992. "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws," ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
  11. Peter F. Orazem & J. Peter Mattila, 2002. "Minimum Wage Effects on Hours, Employment, and Number of Firms: The Iowa Case," Journal of Labor Research, Transaction Publishers, vol. 23(1), pages 3-23, January.
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  13. 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.
  14. Kim, Taeil & Taylor, Lowell J, 1995. "The Employment Effect in Retail Trade of California's 1988 Minimum Wage Increase," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 175-82, April.
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