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The effects of a minimum wage on employment outcomes: an application of regression discontinuity design

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  • Kristine Laura S. Canales

    (Department of Economics, Texas A&M University)

Abstract

In this paper, I ask whether a minimum wage increase results in adverse employment outcomes in terms of work hours and the probability of gaining or retaining employment. Regression discontinuity design (rdd) is employed on a household-level panel survey dataset, using the minimum wage as the forcing variable that determines whether a sample is assigned to either the treatment group (minimum wage worker) or the control group (above minimum wage worker). The rdd graphs and the regressions seem to point to a negative effect of a higher minimum wage on work hours, not only for workers earning the minimum wage but also for workers earning 50 percent more than the minimum wage. The probability of gaining/retaining employment is lower for minimum wage workers and for workers earning 50 percent above the minimum wage.

Suggested Citation

  • Kristine Laura S. Canales, 2014. "The effects of a minimum wage on employment outcomes: an application of regression discontinuity design," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 51(2), pages 97-120, December.
  • Handle: RePEc:phs:prejrn:v:51:y:2014:i:2:p:97-120
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    File URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/912/812
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    References listed on IDEAS

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    1. Lawrence Katz & Alan Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Working Papers 678, Princeton University, Department of Economics, Industrial Relations Section..
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    3. Gerardo P. Sicat, 2010. "Spotlighting on High Economic Growth, Employment of the Poor, and Poverty Reduction: A Three-Pronged Strategy," UP School of Economics Discussion Papers 201007, University of the Philippines School of Economics.
    4. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast-Food Industry," ILR Review, Cornell University, ILR School, vol. 46(1), pages 6-21, October.
    5. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    6. 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 772-793, September.
    7. Stephen Bazen & Julie Le Gallo, 2009. "The Differential Impact Of Federal And State Minimum Wages On Teenage Employment," Working Papers halshs-00408016, HAL.
    8. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
    9. 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.
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    11. repec:fth:prinin:298 is not listed on IDEAS
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    More about this item

    Keywords

    minimum wage; regression discontinuity design; employment Journal: Philippine Review of Economics;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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