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Minimum wages and teen employment: A spatial panel approach

Author

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  • Charlene M. Kalenkoski
  • Donald J. Lacombe

Abstract

The authors employ spatial econometrics techniques and Annual Averages data from the U.S. Bureau of Labor Statistics for 1990-2004 to examine how changes in the minimum wage affect teen employment. Spatial econometrics techniques account for the fact that employment is correlated across states. Such correlation may exist if a change in the minimum wage in a state affects employment not only in its own state but also in other, neighboring states. The authors show that state minimum wages negatively affect teen employment to a larger degree than is found in studies that do not account for this correlation. Their results show a combined direct and indirect effect of minimum wages on teen employment to be -2.1% for a 10% increase in the real effective minimum wage. Ignoring spatial correlation underestimates the magnitude of the effect of minimum wages on teen employment.
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Suggested Citation

  • Charlene M. Kalenkoski & Donald J. Lacombe, 2013. "Minimum wages and teen employment: A spatial panel approach," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 407-417, June.
  • Handle: RePEc:bla:presci:v:92:y:2013:i:2:p:407-417
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    File URL: http://hdl.handle.net/10.1111/pirs.2013.92.issue-2
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    References listed on IDEAS

    as
    1. Lee, Lung-fei & Yu, Jihai, 2010. "Estimation of spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 154(2), pages 165-185, February.
    2. Charlene Kalenkoski & Donald Lacombe, 2008. "Effects of Minimum Wages on Youth Employment: the Importance of Accounting for Spatial Correlation," Journal of Labor Research, Springer, vol. 29(4), pages 303-317, December.
    3. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2009. "Do minimum wages raise employment? Evidence from the U.S. retail-trade sector," Labour Economics, Elsevier, vol. 16(4), pages 397-408, August.
    4. Sylvia A. Allegretto & Arindrajit Dube & Michael Reich, 2011. "Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(2), pages 205-240, April.
    5. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, March.
    6. Dubin, Robin A., 1998. "Spatial Autocorrelation: A Primer," Journal of Housing Economics, Elsevier, vol. 7(4), pages 304-327, December.
    7. Kenneth A. Couch & David C. Wittenburg, 2001. "The Response of Hours of Work to Increases in the Minimum Wage," Southern Economic Journal, Southern Economic Association, vol. 68(1), pages 171-177, July.
    8. J. Barkley Rosser, 2009. "Introduction," Chapters,in: Handbook of Research on Complexity, chapter 1 Edward Elgar Publishing.
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    Cited by:

    1. Frings, Hanna & vom Berge, Philipp & Paloyo, Alfredo R., 2013. "High-Impact Minimum Wages and Heterogeneous Regions," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79828, Verein für Socialpolitik / German Economic Association.
    2. Peng, Ling & Hong, Yongmiao, 2013. "Productivity spillovers among linked sectors," China Economic Review, Elsevier, vol. 25(C), pages 44-61.
    3. Jayaraman, Praveena & Lacombe, Donald J. & Gebremedhin, Tesfa, 2013. "A Spatial Analysis of the Role of Residential Real Estate Investment in the Economic Development of the Northeast Region of the United States," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150953, Agricultural and Applied Economics Association.
    4. Charlene Marie Kalenkoski, 2016. "The effects of minimum wages on youth employment and income," IZA World of Labor, Institute for the Study of Labor (IZA), pages 243-243, March.
    5. Shanshan Liu & Thomas J. Hyclak & Krishna Regmi, 2016. "Impact of the Minimum Wage on Youth Labor Markets," LABOUR, CEIS, vol. 30(1), pages 18-37, March.

    More about this item

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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