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Spatial Heterogeneity and Minimum Wages: Employment Estimates for Teens Using Cross-State Commuting Zones

  • Allegretto, Sylvia
  • Dube, Arindrajit
  • Reich, Michael

Conventional approaches to estimating the effect of minimum wages on teen employment insufficiently account for heterogeneous employment patterns and selectivity of states with higher minimum wages. We overcome this problem by using policy discontinuities at state borders. Our estimates from cross-state labor markets (commuting zones) using data from the Census and the American Community Survey show that the measured negative impacts on teen employment in traditional estimates are driven by insufficient controls for spatial heterogeneity. We also replicate our key results using the Current Population Survey and show that the negative employment impact in traditional specifications is driven by pre-existing trends. Finally, by using a version of randomization inference, we devise a new test for heterogeneous effects of minimum wages across different local labor markets. We do not find evidence of such heterogeneous treatment effects using this new approach.

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Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt1x99m65f.

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Date of creation: 25 Jun 2009
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Handle: RePEc:cdl:indrel:qt1x99m65f
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Web page: http://www.escholarship.org/repec/iir_iirwps/

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  1. David Autor & David Dorn, 2009. "This Job Is "Getting Old": Measuring Changes in Job Opportunities Using Occupational Age Structure," American Economic Review, American Economic Association, vol. 99(2), pages 45-51, May.
  2. Jeffrey P. Thompson, 2009. "Using Local Labor Market Data to Re-Examine the Employment Effects of the Minimum Wage," ILR Review, Cornell University, ILR School, vol. 62(3), pages 343-366, April.
  3. Arindrajit Dube & Suresh Naidu & Michael Reich, 2007. "The Economic Effects of a Citywide Minimum Wage," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(4), pages 522-543, July.
  4. Lalive, Rafael, 2008. "How do extended benefits affect unemployment duration A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 785-806, February.
  5. Daniel Aaronson & Kyung-Hong Park & Daniel G. Sullivan, 2006. "The decline in teen labor force participation," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 2-18.
  6. Alberto Abadie & Alexis Diamond & Jens Hainmueller, 2007. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California's Tobacco Control Program," NBER Working Papers 12831, National Bureau of Economic Research, Inc.
  7. Huang, Rocco R., 2008. "Evaluating the real effect of bank branching deregulation: Comparing contiguous counties across US state borders," Journal of Financial Economics, Elsevier, vol. 87(3), pages 678-705, March.
  8. Baum-Snow, Nathaniel & Neal, Derek, 2009. "Mismeasurement of usual hours worked in the census and ACS," Economics Letters, Elsevier, vol. 102(1), pages 39-41, January.
  9. Dube, Andrajit & Lester, T. William & Reich, Michael, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," Institute for Research on Labor and Employment, Working Paper Series qt86w5m90m, Institute of Industrial Relations, UC Berkeley.
  10. William Wascher & David Neumark, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment," American Economic Review, American Economic Association, vol. 90(5), pages 1362-1396, December.
  11. 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.
  12. 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.
  13. Christopher L. Foote, 2007. "Space and time in macroeconomic panel data: young workers and state-level unemployment revisited," Working Papers 07-10, Federal Reserve Bank of Boston.
  14. Jeffrey P. Thompson, 2009. "Using Local Labor Market Data to Re-Examine the Employment Effects of the Minimum Wage," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 62(3), pages 343-366, April.
  15. Russell S. Sobel, 1999. "Theory and Evidence on the Political Economy of the Minimum Wage," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 761-785, August.
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