IDEAS home Printed from https://ideas.repec.org/p/nim/nimawp/9-2001.html
   My bibliography  Save this paper

Disentangling the minimum wage puzzle: an analysis of job accessions and separations from a longitudinal matched employer- employee data set

Author

Listed:

Abstract

Changes in the legislation in mid-80s in Portugal provide remarkable conditions for economic analysis, as the minimum wage increased very sharply for a very specific group of workers. Relying on a matched employer-employee panel dataset, we model gross job flows - accessions and separations - in continuing firms, as well as in new firms and those going out of business, using a Poisson regression model applied to proportions. Worker behaviour is as well modelled. Employment trends for teenagers, the affected group, are contrasted against older workers, before and after the rise in the youth minimum wage. The major effect on teenagers of a rising minimum wage is the reduction of separations from the employer, which compensates for the reduction of accessions (to new and continuing firms) and the rising dismissals from firms closing down. This result suggests the relevance of supply side factors overcoming demand forces, as they indicate that job attachment for low wage youngsters rises following an increase in their minimum wage. In this sense, our results can reconcile some of the previous evidence that has been presented in the empirical literature when analysing the overall impact of the minimum wage on youth employment without looking at its sources.

Suggested Citation

  • Pedro Portugal & Ana Rute Cardoso, 2001. "Disentangling the minimum wage puzzle: an analysis of job accessions and separations from a longitudinal matched employer- employee data set," NIMA Working Papers 9, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  • Handle: RePEc:nim:nimawp:9/2001
    as

    Download full text from publisher

    File URL: http://www3.eeg.uminho.pt/publications/NIMAwp9.pdf
    File Function: full text
    Download Restriction: none
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mata, Jose & Portugal, Pedro, 1994. "Life Duration of New Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 227-245, September.
    2. 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..
    3. 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.
    4. Anabela Botelho & Glenn W. Harrison & Lígia Costa Pinto & Elisabet E. Rutstrom & Paula Veiga, 2005. "Discounting in developing countries: a pilot experiment in Timor-Leste," NIMA Working Papers 31, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    5. Paulo Guimarães & Octávio Figueirdo & Douglas Woodward, 2003. "A Tractable Approach to the Firm Location Decision Problem," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 201-204, February.
    6. Anabela Botelho & Lígia Costa Pinto & Miguel Portela & Antonio Silva, 2001. "The determinants of success in university entrance," NIMA Working Papers 13, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    7. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 427-472, National Bureau of Economic Research, Inc.
    8. Aslan Zorlu, 2003. "Do ethnicity and sex matter in pay? Analyses of 8 ethnic groups in the Dutch labour market," NIMA Working Papers 21, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    9. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    10. Anabela Botelho & Glenn W. Harrison & Lígia Costa Pinto & Elisabet E. Rutstrom, 2005. "Social norms and social choice," NIMA Working Papers 30, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    11. Mata, Jose & Portugal, Pedro & Guimaraes, Paulo, 1995. "The survival of new plants: Start-up conditions and post-entry evolution," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 459-481, December.
    12. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast-Food Industry," ILR Review, Cornell University, ILR School, vol. 46(1), pages 6-21, October.
    13. Dickens, Richard & Machin, Stephen & Manning, Alan, 1998. "Estimating the effect of minimum wages on employment from the distribution of wages: A critical view," Labour Economics, Elsevier, vol. 5(2), pages 109-134, June.
    14. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
    15. Juan Dolado & Francis Kramarz & Steven Machin & Alan Manning & David Margolis & Coen Teulings, 1996. "The Economic Impact of Minimum Wages in Europe," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00353896, HAL.
    16. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1998. "Minimum Wages and Employment in France and the United States," Papiers du Laboratoire de Microéconomie Appliquée 1998-12, Université Panthéon-Sorbonne (Paris 1).
    17. Anabela Botelho & Mark A. Hirsch & Elisabet E. Rutstrom, 2000. "Culture, nationality and demographics in ultimatum games," NIMA Working Papers 7, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    18. Anabela Botelho & Lígia Costa Pinto, 2000. "Has Portugal gone wireless? Looking back, Looking ahead," NIMA Working Papers 5, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    19. Neumark, David & Wascher, William, 1995. "Minimum Wage Effects on Employment and School Enrollment," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 199-206, April.
    20. Bell, David N F & Wright, Robert E, 1996. "The Impact of Minimum Wages on the Wages of the Low Paid: Evidence from the Wage Boards and Councils," Economic Journal, Royal Economic Society, vol. 106(436), pages 650-656, May.
    21. 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.
    22. Ana Rute Cardoso & Priscila Ferreira, 2009. "The dynamics of job creation and destruction for university graduates: why a rising unemployment rate can be misleading," Applied Economics, Taylor & Francis Journals, vol. 41(19), pages 2513-2521.
    23. Rosa Branca Esteves & Paulo Guimaraes, 2008. "Price Discrimination and Targeted Advertising: A Welfare Analysis," The IUP Journal of Applied Economics, IUP Publications, vol. 0(5), pages 41-47, September.
    24. Guimaraes, Paulo & Figueiredo, Octávio & Woodward, Douglas, 2002. "Modeling industrial location decisions in U.S. counties," ERSA conference papers ersa02p060, European Regional Science Association.
    25. Pinto, Ligia M. & Harrison, Glenn W., 2003. "Multilateral negotiations over climate change policy," Journal of Policy Modeling, Elsevier, vol. 25(9), pages 911-930, December.
    26. Meyer, Robert H & Wise, David A, 1983. "The Effects of the Minimum Wage on the Employment and Earnings of Youth," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 66-100, January.
    27. Anabela Botelho & Glenn W. Harrison & Marc A. Hirsch & Elisabet E. Rutstrom, 2001. "Bargaining behavior, demographics and nationality: a reconsideration of the experimental evidence," NIMA Working Papers 16, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    28. Neumark, David & Wascher, William, 1995. "Minimum-Wage Effects on School and Work Transitions of Teenagers," American Economic Review, American Economic Association, vol. 85(2), pages 244-249, May.
    29. Elvira Lima & Teresa J. Esquerdo, 2003. "The economic costs of alcohol misuse in Portugal," NIMA Working Papers 24, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    30. Natália Barbosa, 2003. "What drives new firms into an industry? An integrative model of entry," NIMA Working Papers 23, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    31. Octavio Figueiredo & Paulo Guimaraes & Douglas Woodward, 2001. "Asymmetric information and location," NIMA Working Papers 11, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    32. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-161, April.
    33. Anabela Botelho, 2001. "Strategic behavior at trial-The production, reporting, and evaluation of complex evidence," NIMA Working Papers 14, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    34. Aslan Zorlu & Joop Hartog, 2005. "The effect of immigration on wages in three european countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(1), pages 113-151, December.
    35. Anabela Botelho & Lígia Costa Pinto & Isabel Rodrigues, 2003. "How to comply with environmental regulations? The role of information," NIMA Working Papers 25, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    36. Coen N. Teulings, 1998. "The Contribution of Minimum Wages to Increasing Wage Inequality," Tinbergen Institute Discussion Papers 98-093/3, Tinbergen Institute.
    37. Machin, Stephen & Manning, Alan, 1996. "Employment and the Introduction of a Minimum Wage in Britain," Economic Journal, Royal Economic Society, vol. 106(436), pages 667-676, May.
    38. Botelho, Anabela & Harrison, Glenn W. & Pinto, Lígia M. Costa & Rutström, Elisabet E., 2009. "Testing static game theory with dynamic experiments: A case study of public goods," Games and Economic Behavior, Elsevier, vol. 67(1), pages 253-265.3, September.
    39. Cardoso, Ana Rute & Portugal, Pedro, 2001. "Disentangling the Minimum Wage Puzzle: An Analysis of Job Accessions and Separations from a Longitudinal Matched Employer-Employee Data Set," CEPR Discussion Papers 2844, C.E.P.R. Discussion Papers.
    40. Meyer, Robert H & Wise, David A, 1983. "Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth," Econometrica, Econometric Society, vol. 51(6), pages 1677-1698, November.
    41. Elvira Lima & David K. Whynes, 2003. "Finance and performance of Portuguese hospitals," NIMA Working Papers 20, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    42. Paula Veiga & Ronald P. Wilder, 2006. "Maternal smoking during pregnancy and birthweight - A propensity score matching approach," NIMA Working Papers 32, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    43. Cécile Wetzels & Aslan Zorlu, 2003. "Wage effects of motherhood: a double selection approach," NIMA Working Papers 22, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    44. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
    45. Miguel Portela, 2001. "The impact of segregation on wage inequality: a look at recruitment and pay policies at the firm level," NIMA Working Papers 8, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    46. Natália Barbosa & Helen Louri, 2005. "Corporate Performance: Does Ownership Matter? A Comparison of Foreign- and Domestic-Owned Firms in Greece and Portugal," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 27(1), pages 73-102, August.
    47. Paula Veiga, 2005. "Income-related health inequality in Portugal," NIMA Working Papers 28, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    48. Pedro P. Barros & Clara E. Dismuke, 2000. "Hospital production in a national health service: the physician's dilemma," NIMA Working Papers 6, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    49. David Neumark, 1999. "The Employment Effects of Recent Minimum Wage Increases: Evidence from a Pre-specified Research Design," NBER Working Papers 7171, National Bureau of Economic Research, Inc.
    50. Zavodny, Madeline, 2000. "The effect of the minimum wage on employment and hours," Labour Economics, Elsevier, vol. 7(6), pages 729-750, November.
    51. Burkhauser, Richard V & Couch, Kenneth A & Wittenburg, David C, 2000. "A Reassessment of the New Economics of the Minimum Wage Literature with Monthly Data from the Current Population Survey," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 653-680, October.
    52. repec:fth:prinin:298 is not listed on IDEAS
    53. Joao Cerejeira da Silva, 2002. "Identification of the Portuguese industrial districts," NIMA Working Papers 17, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    54. Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Wage Dispersion and Employment: Evidence from the U.K. Wages Councils," ILR Review, Cornell University, ILR School, vol. 47(2), pages 319-329, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anabela Botelho & Lígia Costa Pinto, 2001. "Hypothetical, real, and predicted real willingness to pay in open-ended surveys: experimental results," NIMA Working Papers 12, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    2. Sofia Bauducco & Alexandre Janiak, 2015. "The Impact of the Minimum Wage on Capital Accumulation and Employment in a Large-Firm Framework," Working Papers Central Bank of Chile 755, Central Bank of Chile.
    3. Aslan Zorlu & Joop Hartog, 2005. "The effect of immigration on wages in three european countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(1), pages 113-151, December.
    4. Paulo Guimarães, 2002. "The state of Portuguese research in economics: an analysis based on publications in international journals," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(1), pages 3-25, March.
    5. Botelho, Anabela & Pinto, Ligia Costa, 2004. "Students' expectations of the economic returns to college education: results of a controlled experiment," Economics of Education Review, Elsevier, vol. 23(6), pages 645-653, December.
    6. Pinto, Ligia M. & Harrison, Glenn W., 2003. "Multilateral negotiations over climate change policy," Journal of Policy Modeling, Elsevier, vol. 25(9), pages 911-930, December.
    7. Anabela Botelho, 2001. "Strategic behavior at trial-The production, reporting, and evaluation of complex evidence," NIMA Working Papers 14, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    8. Joao Cerejeira da Silva, 2002. "Identification of the Portuguese industrial districts," NIMA Working Papers 17, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    9. Elvira Lima & Teresa J. Esquerdo, 2003. "The economic costs of alcohol misuse in Portugal," NIMA Working Papers 24, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    10. Cardoso, Ana Rute & Portugal, Pedro, 2001. "Disentangling the Minimum Wage Puzzle: An Analysis of Job Accessions and Separations from a Longitudinal Matched Employer-Employee Data Set," CEPR Discussion Papers 2844, C.E.P.R. Discussion Papers.
    11. Ana Rute Cardoso & Priscila Ferreira, 2009. "The dynamics of job creation and destruction for university graduates: why a rising unemployment rate can be misleading," Applied Economics, Taylor & Francis Journals, vol. 41(19), pages 2513-2521.
    12. Anabela Botelho & Ligia Costa Pinto, 2002. "Hypothetical, real, and predicted real willingness to pay in open-ended surveys: experimental results," Applied Economics Letters, Taylor & Francis Journals, vol. 9(15), pages 993-996.
    13. Elvira Lima & David K. Whynes, 2003. "Finance and performance of Portuguese hospitals," NIMA Working Papers 20, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    14. Anabela Botelho & Lígia Costa Pinto & Miguel Portela & Antonio Silva, 2001. "The determinants of success in university entrance," NIMA Working Papers 13, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    15. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Paulo Guimarães, 2002. "The state of Portuguese research in economics: an analysis based on publications in international journals," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(1), pages 3-25, March.
    2. Aslan Zorlu & Joop Hartog, 2005. "The effect of immigration on wages in three european countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 18(1), pages 113-151, December.
    3. Anabela Botelho & Ligia Costa Pinto, 2002. "Hypothetical, real, and predicted real willingness to pay in open-ended surveys: experimental results," Applied Economics Letters, Taylor & Francis Journals, vol. 9(15), pages 993-996.
    4. Anabela Botelho & Lígia Costa Pinto, 2001. "Hypothetical, real, and predicted real willingness to pay in open-ended surveys: experimental results," NIMA Working Papers 12, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    5. Botelho, Anabela & Pinto, Ligia Costa, 2004. "Students' expectations of the economic returns to college education: results of a controlled experiment," Economics of Education Review, Elsevier, vol. 23(6), pages 645-653, December.
    6. Anabela Botelho, 2001. "Strategic behavior at trial-The production, reporting, and evaluation of complex evidence," NIMA Working Papers 14, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    7. Ana Rute Cardoso & Priscila Ferreira, 2009. "The dynamics of job creation and destruction for university graduates: why a rising unemployment rate can be misleading," Applied Economics, Taylor & Francis Journals, vol. 41(19), pages 2513-2521.
    8. Joao Cerejeira da Silva, 2002. "Identification of the Portuguese industrial districts," NIMA Working Papers 17, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    9. Elvira Lima & Teresa J. Esquerdo, 2003. "The economic costs of alcohol misuse in Portugal," NIMA Working Papers 24, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    10. Pinto, Ligia M. & Harrison, Glenn W., 2003. "Multilateral negotiations over climate change policy," Journal of Policy Modeling, Elsevier, vol. 25(9), pages 911-930, December.
    11. Anabela Botelho & Lígia Costa Pinto & Miguel Portela & Antonio Silva, 2001. "The determinants of success in university entrance," NIMA Working Papers 13, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    12. Elvira Lima & David K. Whynes, 2003. "Finance and performance of Portuguese hospitals," NIMA Working Papers 20, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
    13. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," NBER Working Papers 12663, National Bureau of Economic Research, Inc.
    14. Pedro Portugal & Ana Rute Cardoso, 2006. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 988-1013, September.
    15. repec:eee:labchp:v:3:y:1999:i:pb:p:2101-2163 is not listed on IDEAS
    16. David Neumark & Peter Shirley, 2021. "Myth or Measurement: What Does the New Minimum Wage Research Say about Minimum Wages and Job Loss in the United States?," NBER Working Papers 28388, National Bureau of Economic Research, Inc.
    17. Christian Ragacs, 2003. "Mindestlöhne und Beschäftigung: Ein Überblick über die neuere empirische Literatur," Working Papers geewp25, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
    18. Lemos Sara, 2005. "Political Variables as Instruments for the Minimum Wage," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-33, December.
    19. Dessing, Maryke, 2004. "Implications for minimum-wage policies of an S-shaped labor-supply curve," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 543-568, April.
    20. Carlos Oliveira, 2022. "How is the Minimum Wage Shaping the Wage Disitribution: Bite, Spillovers, and Wage Inequality," GEE Papers 0160, Gabinete de Estratégia e Estudos, Ministério da Economia, revised May 2022.
    21. David Neumark & William Wascher, 1995. "The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys," NBER Working Papers 5092, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nim:nimawp:9/2001. 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: . General contact details of provider: http://nima.eeg.uminho.pt/ .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: NIMA (email available below). General contact details of provider: http://nima.eeg.uminho.pt/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.