The Employment Elasticity of the Minimum Wage: Is It Just Politics after All?

44 Pages Posted: 29 Nov 2017

See all articles by Jesse Wursten

Jesse Wursten

KU Leuven, Faculty of Business and Economics (FEB), Students; University of California, Berkeley

Date Written: August 24, 2017

Abstract

The effect of minimum wages on employment is highly disputed.

The main questions in the literature are on how to deal with spatial heterogeneity and dynamics. We use statistical (multi-factor error models) and economic (political ideology as control variable) methods to address the first. Furthermore, we extend the models to a dynamic setting to estimate more long term effects. We find that these enriched models all suggest there are no economically significant negative employment effects attached to moderate increases in the minimum wage.

Keywords: minimum wage, cross-sectional dependence, labour policy, political ideology, common correlated effects models, interactive fixed effects, dynamic factor models, employment elasticity, labour markets

JEL Classification: J38, D22, C23

Suggested Citation

Wursten, Jesse, The Employment Elasticity of the Minimum Wage: Is It Just Politics after All? (August 24, 2017). Available at SSRN: https://ssrn.com/abstract=3076878 or http://dx.doi.org/10.2139/ssrn.3076878

Jesse Wursten (Contact Author)

KU Leuven, Faculty of Business and Economics (FEB), Students ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

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