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The Local Aggregate Effects of Minimum Wage Increases

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  • DANIEL COOPER
  • MARÍA JOSÉ LUENGO‐PRADO
  • JONATHAN A. PARKER

Abstract

Using variation in minimum wages across cities and controlling for differences in business‐cycle factors and long‐run local economic trends, we find that following minimum wage increases, both, prices and nominal spending rise modestly. These gains are larger for certain subcategories of goods such as food away from home and in locations where low‐wage workers account for a larger share of employment. Further, minimum wage increases are associated with reduced total debt among households with low credit scores, higher auto debt, and increased access to credit.

Suggested Citation

  • Daniel Cooper & María José Luengo‐Prado & Jonathan A. Parker, 2020. "The Local Aggregate Effects of Minimum Wage Increases," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(1), pages 5-35, February.
    • Handle: RePEc:wly:jmoncb:v:52:y:2020:i:1:p:5-35
    DOI: 10.1111/jmcb.12684
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    Cited by:

    1. Dow, Wiiliam H & Godoey, Anna & Lowenstein, Christopher A & Reich, Michael, 2019. "Can Economic Policies Reduce Deaths of Despair? Working Paper #104-19," Institute for Research on Labor and Employment, Working Paper Series qt14f015df, Institute of Industrial Relations, UC Berkeley.
    2. Michael Reich, 2021. "The Economics Of A $15 Federal Minimum Wage By 2025," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 40(4), pages 1297-1305, September.
    3. Ahsan, Ishmam, 2021. "Minimum Wage and Sectoral Price Inflation," MPRA Paper 117350, University Library of Munich, Germany, revised May 2023.
    4. Young Cheol Jung & Adian McFarlane & Anupam Das, 2021. "The effect of minimum wages on consumption in Canada," The Economic and Labour Relations Review, , vol. 32(1), pages 65-89, March.
    5. William H. Dow & Anna Godøy & Christopher A. Lowenstein & Michael Reich, 2019. "Can Economic Policies Reduce Deaths of Despair?," NBER Working Papers 25787, National Bureau of Economic Research, Inc.
    6. Bai, Xue & Chatterjee, Arpita & Krishna, Kala & Ma, Hong, 2021. "Trade and minimum wages in general equilibrium: Theory and evidence," Journal of International Economics, Elsevier, vol. 133(C).
    7. Wursten, Jesse & Reich, Michael, 2023. "Racial inequality in frictional labor markets: Evidence from minimum wages," Labour Economics, Elsevier, vol. 82(C).
    8. Yamagishi, Atsushi, 2021. "Minimum wages and housing rents: Theory and evidence," Regional Science and Urban Economics, Elsevier, vol. 87(C).
    9. Dow, William H. & Godøy, Anna & Lowenstein, Christopher & Reich, Michael, 2020. "Can Labor Market Policies Reduce Deaths of Despair?," Journal of Health Economics, Elsevier, vol. 74(C).

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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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