Thursday, February 16, 2023

If we use multi-state commuting zones, which provide superior definitions of local economic areas, we find a robust negative relationship between minimum wages and employment.

What's Across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects. Priyaranjan Jha, David Neumark, Antonio Rodriguez-Lopez. Calif Univ, Irvine, November 2022. https://www.socsci.uci.edu/~jantonio/Papers/minwage_czones.pdf

Abstract: Dube, Lester, and Reich (2010) argue that state-level minimum wage variation correlated with economic shocks generates spurious evidence that higher minimum wages reduce employment. Using minimum wage variation within contiguous county pairs that share a state border, they find no relationship between minimum wages and employment in the U.S. restaurant industry. We show that this result is overturned if we use instead multi-state commuting zones, which provide superior definitions of local economic areas. Using the same within-local area research design—but within cross-border commuting zones—we find a robust negative relationship between minimum wages and employment.

JEL Classification: J23, J38

Check also Exploiting minimum-wage variation within multi-state commuting zones, we document a negative relationship between minimum wages and firm variety; a binding minimum wage further reduces the mass of firms, exacerbating the distortion

Jha, Priyaranjan and Rodriguez-Lopez, Antonio, Minimum Wage and Firm Variety (2021). CESifo Working Paper No. 9312, SSRN: https://ssrn.com/abstract=3932020

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