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How Do Alternative Minimum Wage Variables Compare?

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  • Sara Lemos

Abstract

Several minimum wage variables have been suggested in the literature. Such a variety of variables makes it difficult to compare the associated estimates across studies. One problem is that these estimates are not always calibrated to represent the effect of a 10% increase in the minimum wage. Another problem is that these estimates measure the effect of the minimum wage on the employment of different groups of workers. In this paper we critically compare employment effect estimates using five minimum wage variables common in the literature: real minimum wage, “Kaitz index”, “fraction affected”, “fraction at” and “ fraction below” the minimum wage. Our principal finding is that the sign of this effect is robust across minimum wage variables, but its magnitude and significance are sensitive to the minimum wage variable used.

Suggested Citation

  • Sara Lemos, 2005. "How Do Alternative Minimum Wage Variables Compare?," Discussion Papers in Economics 05/6, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:05/6
    as

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    File URL: https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp05-6.pdf
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    References listed on IDEAS

    as
    1. Borjas, George J. & Freeman, Richard B. (ed.), 1992. "Immigration and the Work Force," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226066332, December.
    2. Mark B. Stewart, 2002. "Estimating the Impact of the Minimum Wage Using Geographical Wage Variation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(supplemen), pages 583-605, December.
    3. Alida Castillo-Freeman & Richard B. Freeman, 1992. "When the Minimum Wage Really Bites: The Effect of the U.S.-Level Minimum on Puerto Rico," NBER Chapters, in: Immigration and the Work Force: Economic Consequences for the United States and Source Areas, pages 177-212, National Bureau of Economic Research, Inc.
    4. George J. Borjas & Richard B. Freeman, 1992. "Immigration and the Work Force: Economic Consequences for the United States and Source Areas," NBER Books, National Bureau of Economic Research, Inc, number borj92-1, March.
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    More about this item

    Keywords

    minimum wage; labour cost; employment; hours; Brazil;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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