Do Lower Minimum Wages for Young Workers Raise Their Employment? Evidence from a Danish Discontinuity

71 Pages Posted: 2 Jan 2018 Last revised: 4 Feb 2019

See all articles by Claus Thustrup Kreiner

Claus Thustrup Kreiner

University of Copenhagen - Department of Economics

Daniel Reck

London School of Economics & Political Science (LSE)

Peer Ebbesen Skov

Auckland University of Technology

Date Written: December 2017

Abstract

We estimate the impact of youth minimum wages on youth employment by exploiting a large discontinuity in Danish minimum wage rules at age 18, using monthly payroll records for the Danish population. The hourly wage jumps up by 40 percent at the discontinuity. Employment falls by 33 percent and total input of hours decreases by 45 percent, leaving the aggregate wage payment almost unchanged. We show theoretically how the discontinuity may be exploited to evaluate policy changes. The relevant elasticity for evaluating the effect on youth employment of changes in their minimum wage is in the range 0.6-1.1.

Keywords: employment, minimum wage policy, regression discontinuity design

JEL Classification: H2, J2, J3

Suggested Citation

Kreiner, Claus Thustrup and Reck, Daniel and Skov, Peer Ebbesen, Do Lower Minimum Wages for Young Workers Raise Their Employment? Evidence from a Danish Discontinuity (December 2017). CEPR Discussion Paper No. DP12539. Available at SSRN: https://ssrn.com/abstract=3095589

Claus Thustrup Kreiner (Contact Author)

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Daniel Reck

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Peer Ebbesen Skov

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

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