Estimating the Effect of Minimum Wages on Employment from the Distribution of Wages: A Critical Review

41 Pages Posted: 12 Feb 1997

See all articles by Richard Dickens

Richard Dickens

London School of Economics

Stephen J. Machin

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); London School of Economics & Political Science (LSE) - Department of Economics

Alan Manning

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Abstract

In two papers, Meyer and Wise (1983a,b) present an ingenious method for estimating the effect of minimum wage rates on wages and employment using data based only on the observed cross-sectional distribution of wages. They, and others who have used this method, have generally found that the minimum wage causes substantial losses in employment. In this paper we evaluate the robustness of this technique. We argue that the estimates, at least for the UK, are very sensitive to the functional form assumed for the distribution of wages and to the assumption made about how far up the wage distribution the minimum wage has spillover effects.

JEL Classification: J23, J38

Suggested Citation

Dickens, Richard and Machin, Stephen J. and Manning, Alan, Estimating the Effect of Minimum Wages on Employment from the Distribution of Wages: A Critical Review. Available at SSRN: https://ssrn.com/abstract=439 or http://dx.doi.org/10.2139/ssrn.439

Richard Dickens

London School of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Stephen J. Machin (Contact Author)

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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

Houghton Street
London WC2A 2AE
United Kingdom

Alan Manning

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
(44 20) 7955 6078 (Phone)

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