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Minimum Wage Shocks, Employment Flows and Labor Market Frictions

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  • Dube, Arindrajit
  • Lester, T. William
  • Reich, Michael

Abstract

We provide the first estimates of the effects of minimum wages on employment flows in the U.S. labor market, identifying the impact by using policy discontinuities at state borders. We find that minimum wages have sizeable negative effect on employment flows but not stocks. Separations and accessions fall among affected workers, especially those with low tenure. We do not find changes in the duration of non-employment for separations or hires. This evidence is consistent with search models with endogenous separations, but explanations focused only on quits or only on layoffs are unlikely to explain the full complement of findings.

Suggested Citation

  • Dube, Arindrajit & Lester, T. William & Reich, Michael, 2013. "Minimum Wage Shocks, Employment Flows and Labor Market Frictions," Institute for Research on Labor and Employment, Working Paper Series qt27z0006g, Institute of Industrial Relations, UC Berkeley.
  • Handle: RePEc:cdl:indrel:qt27z0006g
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    Keywords

    Social and Behavioral Sciences; Minimum Wage; Labor Market Flows; Job Turnover; Search Frictions; Monopsony; Unemployment;

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