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

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

Abstract

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.

Suggested Citation

  • Allegretto, Sylvia & Dube, Arindrajit & Reich, Michael, 2009. "Spatial Heterogeneity and Minimum Wages: Employment Estimates for Teens Using Cross-State Commuting Zones," Institute for Research on Labor and Employment, Working Paper Series qt1x99m65f, Institute of Industrial Relations, UC Berkeley.
  • Handle: RePEc:cdl:indrel:qt1x99m65f
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    References listed on IDEAS

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    7. 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.
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    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.
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    12. 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.
    13. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
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    Cited by:

    1. Allegretto, Sylvia & Dube, Arindrajit & Reich, Michael & Zipperer, Ben, 2013. "Credible Research Designs for Minimum Wage Studies," Institute for Research on Labor and Employment, Working Paper Series qt3hk7s3fw, Institute of Industrial Relations, UC Berkeley.
    2. Belman, Dale. & Wolfson, Paul., 2016. "What does the minimum wage do in developing countries? : A review of studies and methodologies," ILO Working Papers 994893283402676, International Labour Organization.

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