Reconciling the Evidence of Card and Krueger (1994) and Neumark and Wascher (2000)

Abstract

We employ the original Card and Krueger (1994) and Neumark and Wascher (2000) data together with the changes-in-changes (CIC) estimator to re-examine the evidence of the effect of minimum wages on employment. Our study reconciles the controversial positive average employment effect reported by the former study and the negative average employment effect reported by the latter study. Our main finding, which is supported by both datasets, is that the controversial result remains valid only for small fast-food restaurants. This finding is accompanied with a new possible explanation.

Keywords: CIC estimator, employment, minimum wage, nonlinear treatment effect models

JEL Classification: C21, J23, J38