Looking for a Needle in a Haystack? A Structural Time Series Model of the Relationship Between Teenage Employment and Minimum Wages in the United States
The work of Card and Krueger has cast doubt on the nature of the relationship between the minimum wage and teenage employment. The earlier "consensus" finding of a small but statistically significant negative effect was based on time series data whereas Card and Krueger's findings are based mainly on cross section data. In this article, we re-examine the time series relationship between minimum wage and teenage employment. We find that previous models break down due to their inability to capture changes in the trend, cyclical and seasonal components of teenage employment. We propose a structural time series model in which these components are treated as stochastic components and which contains the traditional approach as a special case. The model when estimated up to 1979 accurately predicts what happens to teenage employment subsequently, when the minimum wage was frozen after 1981 and then increased quite substantially in the early 1990s. Moreover, we find that there is a significant, negative effect of the minimum wage on teenage employment and its size and significance have hardly changed during the 1980s and early 1990s. Finally, the model remains robust in an out-of-sample test for 1993-99 containing two further minimum wage hikes.
|Date of creation:||01 Aug 2000|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
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.:
- Krane, Spencer & Wascher, William, 1999.
"The cyclical sensitivity of seasonality in U.S. employment,"
Journal of Monetary Economics,
Elsevier, vol. 44(3), pages 523-553, December.
- Spencer D. Krane & William L. Wascher, 1995. "The cyclical sensitivity of seasonality in U.S. employment," Finance and Economics Discussion Series 95-43, Board of Governors of the Federal Reserve System (U.S.).
- S. Krane & W. Wascher, 1999. "The cyclical sensitivity of seasonality in US employment," BIS Working Papers 67, Bank for International Settlements.
- Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
- Harvey, Andrew & Scott, Andrew, 1994. "Seasonality in Dynamic Regression Models," Economic Journal, Royal Economic Society, vol. 104(427), pages 1324-1345, November.
- Andrew C Harvey & Andrew Scott, 1994. "Seasonality in Dynamic Regression Models," CEP Discussion Papers dp0184, Centre for Economic Performance, LSE.
- Harvey, Andrew, 1997. "Trends, Cycles and Autoregressions," Economic Journal, Royal Economic Society, vol. 107(440), pages 192-201, January.
- Charles Brown & Curtis Gilroy & Andrew Kohen, 1983. "Time-Series Evidence of the Effect of the Minimum Wage on Youth Employment and Unemployment," Journal of Human Resources, University of Wisconsin Press, vol. 18(1), pages 3-31.
- Charles Brown & Curtis Gilroy & Andrew Kohen, 1981. "Time-Series Evidence of the Effect of the Minimum Wage on Youth Employment and Unemployment," NBER Working Papers 0790, National Bureau of Economic Research, Inc.
- Deere, Donald & Murphy, Kevin M & Welch, Finis, 1995. "Employment and the 1990-1991 Minimum-Wage Hike," American Economic Review, American Economic Association, vol. 85(2), pages 232-237, May.
- Bazen, Stephen & Marimoutou, Velayoudom, 2002. " Looking for a Needle in a Haystack? A Re-examination of the Time Series Relationship between Teenage Employment and Minimum Wages in the United States," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(0), pages 699-725, Supplemen.
- Stephen Bazen & Velayoudom Marimoutou, 2002. "Looking for a Needle in a Haystack? A Re-examination of the Time Series Relationship between Teenage Employment and Minimum Wages in the United States," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(s1), pages 699-725, 08.
- Harvey, A C, et al, 1986. "Stochastic Trends in Dynamic Regression Models: An Application to the Employment-Output Equations," Economic Journal, Royal Economic Society, vol. 96(384), pages 975-985, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ecm:wc2000:0495. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.