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The Effect of Minimum Wages on Labor Market Outcomes: County-Level Estimates from the Restaurant-and-Bar Sector

  • John T. Addison


    (Queen’s University Belfast, UK and The Rimini Centre for Economic Analysis, Italy.)

  • McKinley L. Blackburn


    (University of South Carolina, USA.)

  • Chad D. Cotti


    (University of South Carolina, USA.)

We use county-level data on employment and earnings in the restaurant-and-bar sector to evaluate the impact of minimum wage changes on low-wage labor markets. Our empirical approach is similar to the literature that has used state-level panel data to estimate minimum-wage impacts, with the difference that we focus on a particular sector rather than demographic group. Our estimated models are consistent with a simple competitive model of the restaurant-and-bar labor market in which supply-and-demand factors affect both the equilibrium outcome and the probability that a minimum wage will be binding in any given time period. Our evidence does not suggest that minimum wages reduce employment in the overall restaurant-and-bar sector, after controls for trends in sector employment at the county level are incorporated in the model. Employment in this sector appears to exhibit a downward long-term trend in states that have increased their minimum wages relative to states that have not, thereby predisposing fixed-effects estimates towards finding negative employment effects.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 02-08.

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Date of creation: Jan 2008
Date of revision: Jan 2008
Handle: RePEc:rim:rimwps:02-08
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