Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data
Traditional estimates of minimum wage effects include controls for state unemployment rates and state and year fixed-effects. Using CPS data on teens for the period 1990 â€“ 2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and vary with the source of identifying variation. Including controls for long-term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out more negative long run effects. We do not find evidence of heterogeneous employment effects in different parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at indexation of the minimum wage in some states.
|Date of creation:||21 Jun 2010|
|Contact details of provider:|| Postal: 2521 Channing Way # 5555, Berkeley, CA 94720-5555|
Web page: http://www.escholarship.org/repec/iir_iirwps/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pia M. Orrenius & Madeline Zavodny, 2008.
"The Effect of Minimum Wages on Immigrants' Employment and Earnings,"
Cornell University, ILR School, vol. 61(4), pages 544-563, July.
- Orrenius, Pia M. & Zavodny, Madeline, 2008. "The Effect of Minimum Wages on Immigrants’ Employment and Earnings," IZA Discussion Papers 3499, Institute for the Study of Labor (IZA).
- Orrenius, Pia M. & Zavodny, Madeline, 2008. "The effect of minimum wages on immigrants' employment and earnings," Working Papers 0805, Federal Reserve Bank of Dallas.
- Laura Giuliano, 2007. "Minimum wage effects on employment, substitution, and the quality of the teenage labor supply: Evidence from personal data," Working Papers 0723, University of Miami, Department of Economics.
- 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.
- Pinoli, Sara, 2008. "Rational Expectations and the Puzzling No-Effect of the Minimum Wage," MPRA Paper 11405, University Library of Munich, Germany.
- Pinoli, Sara, 2010. "Rational Expectations and the Puzzling No-Effect of the Minimum Wage," Working Paper Series 2010:10, Uppsala University, Department of Economics.
- Pinoli, Sara, 2010. "Rational Expectations and the Puzzling No-Effect of the Minimum Wage," IZA Discussion Papers 4933, Institute for the Study of Labor (IZA).
- 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.
- 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.
- 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.
- Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-350, April.
- Joseph Sabia, 2009. "The Effects of Minimum Wage Increases on Retail Employment and Hours: New Evidence from Monthly CPS Data," Journal of Labor Research, Springer, vol. 30(1), pages 75-97, March. Full references (including those not matched with items on IDEAS)