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

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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.

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  • 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
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    Cited by:

    1. 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.
    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. 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.
    4. 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.
    5. 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.
    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. 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.
    8. 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.
    9. 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.
    10. 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.
    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. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142.

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    JEL classification:

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

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