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Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations from Longitudinal Matched Employer-Employee Data Set


  • Pedro Portugal
  • Ana Rute Cardoso


Changes in the legislation in mid-80s in Portugal provide remarkably good conditions for analysis of the employment effects of mandatory minimum wages, 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 worker flows - accessions and separations - in continuing firms, as well as in new firms and those going out of business, using a count regression model applied to proportions. 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. In this sense, our results can reconcile some of the previous evidence that has been presented in the empirical literature when analyzing the aggregate impact of the minimum wage on youth employment without decomposing it by type of worker flow.

Suggested Citation

  • Pedro Portugal & Ana Rute Cardoso, 2002. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations from Longitudinal Matched Employer-Employee Data Set," Working Papers w200208, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w200208

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    References listed on IDEAS

    1. Yannis Bilias & Roger Koenker, 2001. "Quantile regression for duration data: A reappraisal of the Pennsylvania Reemployment Bonus Experiments," Empirical Economics, Springer, vol. 26(1), pages 199-220.
    2. Mário Centeno, 2004. "The Match Quality Gains from Unemployment Insurance," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
    3. Acemoglu, Daron & Shimer, Robert, 2000. "Productivity gains from unemployment insurance," European Economic Review, Elsevier, vol. 44(7), pages 1195-1224, June.
    4. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    5. José A. F. Machado & Pedro Portugal, 2002. "Quantile Regression Methods: na Application to U.S. Unemployment Duration," Working Papers w200201, Banco de Portugal, Economics and Research Department.
    6. Christian Belzil, 2001. "Unemployment insurance and subsequent job duration: job matching versus unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 619-636.
    7. Roger Koenker & Zhijie Xiao, 2002. "Inference on the Quantile Regression Process," Econometrica, Econometric Society, vol. 70(4), pages 1583-1612, July.
    8. Bernhardt, Annette, et al, 1999. "Trends in Job Instability and Wages for Young Adult Men," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 65-90, October.
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    Cited by:

    1. Arnab K. Basu & Nancy H. Chau & Ravi Kanbur, 2015. "Contractual Dualism, Market Power and Informality," Economic Journal, Royal Economic Society, vol. 125(589), pages 1534-1573, December.

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy


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