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The Employment Effects of the Minimum Wage: A Selection Ratio Approach to Measuring Treatment Effects

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  • David Pence Slichter

Abstract

This paper studies the employment effects of the minimum wage using a novel empirical strategy which can allow the researcher to identify treatment effects when more than one control group is available but each such control group is imperfect. Expanding on previous researchers who have compared regions which increase the minimum wage with nearby regions which do not change the minimum wage, I compare border counties in which the minimum wage increases to the set of neighboring counties, the set of neighbor-of-neighboring counties, etc. The key innovation is to model the ratio of the bias of these comparisons. The model I select uses the relative similarity of control groups to the treated group on observables as a guide to their relative similarity on unobservables. Crucially, models of this type have a testable implication when there are enough control groups. Using data from the United States, I find that recent minimum wage increases have produced modest or zero disemployment effects for teenagers.

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  • David Pence Slichter, 2015. "The Employment Effects of the Minimum Wage: A Selection Ratio Approach to Measuring Treatment Effects," 2015 Papers psl76, Job Market Papers.
    • Handle: RePEc:jmp:jm2015:psl76
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    4. Das, Tirthatanmoy & Polachek, Solomon, 2017. "Micro Foundations of Earnings Differences," IZA Discussion Papers 10922, Institute of Labor Economics (IZA).
    5. David Neumark, 2017. "The Employment Effects of Minimum Wages: Some Questions We Need to Answer," NBER Working Papers 23584, National Bureau of Economic Research, Inc.

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    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other

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