IDEAS home Printed from https://ideas.repec.org/p/ags/aaea25/361113.html
   My bibliography  Save this paper

The impact of regionally tiered minimum wage on firms' credit default

Author

Listed:
  • Acquah-Sarpong, Richard

Abstract

Are firms better off when two adjacent regions with historically the same minimum wage experience a divergence in the minimum wage? We answer this question by investigating Oregon’s tiered minimum wage policy, implemented in 2016, and examining how introducing a regional wage difference for firms within and outside the Portland urban growth boundary (UGB) impacts firms’ credit default. We find that for firms in the Portland Urban Growth Boundary (UGB) with the higher minimum wage, introducing the tiered system led to a 3.4% increase in their credit scores relative to the credit scores of firms in the surrounding region with a lower minimum wage. This result implies a decrease in the average duration of delayed payment by 3.7 days. Our findings are particularly significant among small, independent, private firms and those outside the low-wage, high-violation industries. Although the intended purpose of the tiered policy was to alleviate financial pressure on firms in lower wage areas, it presents a net advantage to firms in higher-wage Portland UGB. Rather than reducing burdens for firms in surrounding areas that pay lower wages, the tiered policy has unintentionally placed them at a comparative disadvantage.

Suggested Citation

  • Acquah-Sarpong, Richard, 2025. "The impact of regionally tiered minimum wage on firms' credit default," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 361113, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:361113
    DOI: 10.22004/ag.econ.361113
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/361113/files/75321_95248_105300_tmp_default.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.361113?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Perez Perez, Jorge, 2020. "City Minimum Wages and Spatial Equilibrium Effects," SocArXiv fpx9e, Center for Open Science.
    2. Dara Lee Luca & Michael Luca, 2019. "Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit," NBER Working Papers 25806, National Bureau of Economic Research, Inc.
    3. Mayneris, Florian & Poncet, Sandra & Zhang, Tao, 2018. "Improving or disappearing: Firm-level adjustments to minimum wages in China," Journal of Development Economics, Elsevier, vol. 135(C), pages 20-42.
    4. Shirley, Peter, 2018. "The response of commuting patterns to cross-border policy differentials: Evidence from the American Community Survey," Regional Science and Urban Economics, Elsevier, vol. 73(C), pages 1-16.
    5. Lisa J Dettling & Joanne W Hsu, 2021. "Minimum Wages and Consumer Credit: Effects on Access and Borrowing [Price pass-through and the minimum wage]," The Review of Financial Studies, Society for Financial Studies, vol. 34(5), pages 2549-2579.
    6. Doruk Cengiz & Arindrajit Dube & Attila Lindner & Ben Zipperer, 2019. "The Effect of Minimum Wages on Low-Wage Jobs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1405-1454.
    7. Alfredo Cartone & Domenica Panzera & Paolo Postiglione, 2022. "Regional economic disparities, spatial dependence and proximity structures," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(5), pages 1034-1050, October.
    8. Clemens, Jeffrey & Wither, Michael, 2019. "The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers," Journal of Public Economics, Elsevier, vol. 170(C), pages 53-67.
    9. Niklas Engbom & Christian Moser, 2022. "Earnings Inequality and the Minimum Wage: Evidence from Brazil," American Economic Review, American Economic Association, vol. 112(12), pages 3803-3847, December.
    10. Joan Monras, 2019. "Minimum Wages and Spatial Equilibrium: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 37(3), pages 853-904.
    11. Justin H. Leung, 2021. "Minimum Wage and Real Wage Inequality: Evidence from Pass-Through to Retail Prices," The Review of Economics and Statistics, MIT Press, vol. 103(4), pages 754-769, October.
    12. Rohlin, Shawn M., 2011. "State minimum wages and business location: Evidence from a refined border approach," Journal of Urban Economics, Elsevier, vol. 69(1), pages 103-117, January.
    13. Veronica Grembi & Tommaso Nannicini & Ugo Troiano, 2016. "Do Fiscal Rules Matter?," American Economic Journal: Applied Economics, American Economic Association, vol. 8(3), pages 1-30, July.
    14. Legal, Diego & Young, Eric R., 2024. "The effect of minimum wages on consumer bankruptcy," Journal of Economics and Business, Elsevier, vol. 129(C).
    15. Mario Bossler & Thorsten Schank, 2023. "Wage Inequality in Germany after the Minimum Wage Introduction," Journal of Labor Economics, University of Chicago Press, vol. 41(3), pages 813-857.
    16. Panagiotis Artelaris, 2021. "Regional economic growth and inequality in Greece," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(1), pages 141-158, February.
    17. Fabrizio Barca & Philip McCann & Andrés Rodríguez‐Pose, 2012. "The Case For Regional Development Intervention: Place‐Based Versus Place‐Neutral Approaches," Journal of Regional Science, Wiley Blackwell, vol. 52(1), pages 134-152, February.
    18. 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.
    19. Abbott, Joshua K. & Allen Klaiber, H., 2013. "The value of water as an urban club good: A matching approach to community-provided lakes," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 208-224.
    20. Arindrajit Dube & Suresh Naidu & Michael Reich, 2007. "The Economic Effects of a Citywide Minimum Wage," ILR Review, Cornell University, ILR School, vol. 60(4), pages 522-543, July.
    21. Loukas Karabarbounis & Jeremy Lise & Anusha Nath, 2022. "Minimum Wages and Labor Markets in the Twin Cities," NBER Working Papers 30239, National Bureau of Economic Research, Inc.
    22. William E. Even & David A. Macpherson, 2019. "Where Does the Minimum Wage Bite Hardest in California?," Journal of Labor Research, Springer, vol. 40(1), pages 1-23, March.
    23. Cristian Alonso, 2022. "Beyond Labor Market Outcomes: The Impact of the Minimum Wage on Nondurable Consumption," Journal of Human Resources, University of Wisconsin Press, vol. 57(5), pages 1690-1714.
    24. Howell, Anthony, 2020. "Minimum wage impacts on Han-minority Workers’ wage distribution and inequality in urban china," Journal of Urban Economics, Elsevier, vol. 115(C).
    25. McKinnish, Terra, 2017. "Cross-state differences in the minimum wage and out-of-state commuting by low-wage workers," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 137-147.
    26. Ekaterina Jardim & Mark C. Long & Robert Plotnick & Emma van Inwegen & Jacob Vigdor & Hilary Wething, 2022. "Minimum-Wage Increases and Low-Wage Employment: Evidence from Seattle," American Economic Journal: Economic Policy, American Economic Association, vol. 14(2), pages 263-314, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arindrajit Dube & Attila S. Lindner, 2024. "Minimum Wages in the 21st Century," NBER Working Papers 32878, National Bureau of Economic Research, Inc.
    2. Dharmasankar, Sharada & Yoo, Hoyoung, 2023. "Assessing the main and spillover effects of Seattle's minimum wage on establishment decisions," Regional Science and Urban Economics, Elsevier, vol. 99(C).
    3. Link, Sebastian, 2024. "The price and employment response of firms to the introduction of minimum wages," Journal of Public Economics, Elsevier, vol. 239(C).
    4. Jardim, Ekaterina & Long, Mark C. & Plotnick, Robert & Vigdor, Jacob & Wiles, Emma, 2024. "Local minimum wage laws, boundary discontinuity methods, and policy spillovers," Journal of Public Economics, Elsevier, vol. 234(C).
    5. David Neumark & Peter Shirley, 2022. "Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 384-417, October.
    6. González, Ignacio & Sala, Hector & Trivín, Pedro, 2025. "Consumption Responses to a Major Minimum Wage Increase: Evidence from Spain," IZA Discussion Papers 17923, Institute of Labor Economics (IZA).
    7. Loukas Karabarbounis & Jeremy Lise & Anusha Nath, 2022. "Minimum Wages and Labor Markets in the Twin Cities," Working Papers 793, Federal Reserve Bank of Minneapolis.
    8. Priyaranjan Jha & David Neumark & Antonio Rodriguez-Lopez, 2022. "What's Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects," CESifo Working Paper Series 9746, CESifo.
    9. 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).
    10. Qianqian Yang & Nobuaki Hamaguchi, 2025. "Revisiting Minimum Wage: From Labor Economics to Spatial Economics," Discussion Paper Series DP2025-08, Research Institute for Economics & Business Administration, Kobe University.
    11. Winters, John V., 2022. "Minimum Wages and Restaurant Employment for Teens and Adults in Metropolitan and Non-metropolitan Areas," IZA Discussion Papers 15499, Institute of Labor Economics (IZA).
    12. Dami'an Vergara, 2022. "Minimum Wages and Optimal Redistribution," Papers 2202.00839, arXiv.org, revised Dec 2022.
    13. Yamagishi, Atsushi, 2021. "Minimum wages and housing rents: Theory and evidence," Regional Science and Urban Economics, Elsevier, vol. 87(C).
    14. Ahn, Taehyun, 2024. "Minimum wage and self-employed business owners: Evidence from South Korea," Labour Economics, Elsevier, vol. 88(C).
    15. Gavoille, Nicolas & Zasova, Anna, 2023. "What we pay in the shadows: Labor tax evasion, minimum wage hike and employment," Journal of Public Economics, Elsevier, vol. 228(C).
    16. Kunaschk, Max, 2024. "The effects of minimum wages on employment and prices—Evidence from the hairdressing sector," Labour Economics, Elsevier, vol. 88(C).
    17. Marianna Kudlyak & Murat Tasci & Didem Tuzemen, 2019. "Minimum Wage Increases and Vacancies," Working Papers 19-30R, Federal Reserve Bank of Cleveland, revised 21 Apr 2022.
    18. Ma, Shuang & Li, Xuan & Wu, Xi, 2024. "Minimum wage and internal labor migration: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 226(C).
    19. Neumark David, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, De Gruyter, vol. 20(3), pages 293-329, August.
    20. Isphording, Ingo E. & Caliendo, Marco & Mahlstedt, Robert & Pestel, Nico & Zimpelmann, Christian, 2022. "Auswirkungen des gesetzlichen Mindestlohns auf individuelle Beschäftigungsbewegungen und betriebliche Lohnstrukturen in den Jahren 2015 bis 2020," IZA Research Reports 133, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea25:361113. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.