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Minimum Wages and Employment: Reconsidering the Use of a Time-Series Approach as an Evaluation Tool

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Listed:
  • Lee, Wang-Sheng

    () (Deakin University)

  • Suardi, Sandy

    () (La Trobe University)

Abstract

The time-series approach used in the minimum wage literature essentially aims to estimate a treatment effect of increasing the minimum wage. In this paper, we employ a novel approach based on aggregate time-series data that allows us to determine if minimum wage changes have significant effects on employment. This involves the use of tests for structural breaks as a device for identifying discontinuities in the data which potentially represent treatment effects. In an application based on Australian data, the tentative conclusion is that the introduction of minimum wage legislation in Australia in 1997 and subsequent minimum wage increases appear not to have had any significant negative employment effects for teenagers.

Suggested Citation

  • Lee, Wang-Sheng & Suardi, Sandy, 2010. "Minimum Wages and Employment: Reconsidering the Use of a Time-Series Approach as an Evaluation Tool," IZA Discussion Papers 4748, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4748
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    References listed on IDEAS

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    1. Alison J. Wellington, 1991. "Effects of the Minimum Wage on the Employment Status of Youths: An Update," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 27-46.
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    3. Anne Morrison Piehl & Suzanne J. Cooper & Anthony A. Braga & David M. Kennedy, 2003. "Testing for Structural Breaks in the Evaluation of Programs," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 550-558, August.
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    5. Matthew James & Mark Wooden & Peter Dawkins, 2001. "Minimum Wages And The Fallacy Of The Inflated Denominator," Economic Papers, The Economic Society of Australia, vol. 20(3), pages 59-70, September.
    6. Ian Watson, 2004. "Minimum Wages and Employment: Comment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(2), pages 166-172, June.
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    8. Harding, Don & Harding, Glenys, 2004. "Minimum wages in Australia: an analysis of the impact on small and medium sized businesses," MPRA Paper 25, University Library of Munich, Germany.
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    13. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
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    19. Hristos Doucouliagos & T. D. Stanley, 2009. "Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis," British Journal of Industrial Relations, London School of Economics, vol. 47(2), pages 406-428, June.
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    Cited by:

    1. Patrick Belser & Uma Rani, 2015. "Minimum wages and inequality," Chapters,in: Labour Markets, Institutions and Inequality, chapter 5, pages 123-146 Edward Elgar Publishing.

    More about this item

    Keywords

    teenage employment; structural break; minimum wage;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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