Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties

Institute for Research on Labor and Employment Working Paper Series No. iirwps-157-07

62 Pages Posted: 10 Aug 2007

See all articles by Arindrajit Dube

Arindrajit Dube

University of California, Berkeley - Institute for Research on Labor and Employment

T. William Lester

University of California, Berkeley - Institute of Industrial Relations

Michael Reich

University of California, Berkeley - Department of Economics

Date Written: August 1, 2007

Abstract

Local case studies of minimum wages typically find no significant employment effects, while studies using national data find some negative effects for teenagers. We argue that heterogeneity in spatial employment trends generates biased estimates in national analyses and causes overstatement of precision in local and national studies. We propose two new local estimators that compare all contiguous counties or metro areas in the U.S. that straddle a state-based minimum wage gradient. We find that the negative elasticities in national fixed-effects models are generated by unobserved heterogeneities in employment trends. Our local estimators are more robust and show no employment effects.

Keywords: Minimum Wage, Restaurants, omitted variable bias, spatial trends

JEL Classification: J23, J31, J42, C33

Suggested Citation

Dube, Arindrajit and Lester, T. William and Reich, Michael, Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties (August 1, 2007). Institute for Research on Labor and Employment Working Paper Series No. iirwps-157-07. Available at SSRN: https://ssrn.com/abstract=1005523 or http://dx.doi.org/10.2139/ssrn.1005523

Arindrajit Dube

University of California, Berkeley - Institute for Research on Labor and Employment ( email )

2521 Channing Way #5555
Berkeley, CA 94720
United States
510-642-9951 (Phone)

HOME PAGE: http://www.irle.berkeley.edu/cwed/dube.html

T. William Lester (Contact Author)

University of California, Berkeley - Institute of Industrial Relations ( email )

Berkeley, CA 94720
United States

Michael Reich

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-643-7079 (Phone)
510-642-6432 (Fax)

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