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

Government Institute for Economic Research Working Paper No. 24

30 Pages Posted: 4 May 2011

See all articles by Olli Tapani Ropponen

Olli Tapani Ropponen

Government of the Republic of Finland - VATT Institute for Economic Research; University of Helsinki - Department of Political and Economic Studies

Date Written: April 2011

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

Suggested Citation

Ropponen, Olli Tapani, Reconciling the Evidence of Card and Krueger (1994) and Neumark and Wascher (2000) (April 2011). Government Institute for Economic Research Working Paper No. 24. Available at SSRN: https://ssrn.com/abstract=1829847 or http://dx.doi.org/10.2139/ssrn.1829847

Olli Tapani Ropponen (Contact Author)

Government of the Republic of Finland - VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

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