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The Effect of Minimum Wages on Wages and Employment: County-Level Estimates for the United States

Author

Listed:
  • Addison, John T.

    () (University of South Carolina)

  • Blackburn, McKinley L.

    () (University of South Carolina)

  • Cotti, Chad

    () (University of Wisconsin, Oshkosh)

Abstract

We use county-level data on employment and earnings in the restaurant-and-bar sector to evaluate the impact of minimum wage changes on low-wage labor markets. Our empirical approach is similar to the literature that has used state-level panel data to estimate minimum-wage impacts, with the difference that we focus on a particular sector rather than demographic group. Our estimated models are consistent with a simple competitive model of the restaurant-and-bar labor market in which supply-and-demand factors affect both the equilibrium outcome and the probability that a minimum wage will be binding in any given time period. Our evidence does not suggest that minimum wages reduce employment in the overall restaurant-and-bar sector, after controls for trends in sector employment at the county level are incorporated in the model. Employment in this sector appears to exhibit a downward long-term trend in states that have increased their minimum wages relative to states that have not, thereby predisposing fixed-effects estimates towards finding negative employment effects.

Suggested Citation

  • Addison, John T. & Blackburn, McKinley L. & Cotti, Chad, 2008. "The Effect of Minimum Wages on Wages and Employment: County-Level Estimates for the United States," IZA Discussion Papers 3300, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp3300
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    References listed on IDEAS

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    1. Lawrence Katz & Alan Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Working Papers 678, Princeton University, Department of Economics, Industrial Relations Section..
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    Cited by:

    1. Laura Giuliano, 2013. "Minimum Wage Effects on Employment, Substitution, and the Teenage Labor Supply: Evidence from Personnel Data," Journal of Labor Economics, University of Chicago Press, vol. 31(1), pages 155-194.

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    More about this item

    Keywords

    wages and employment; minimum wages; county-level data; spatial trends;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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