Full Citation

Title: What is the Optimal Minimum Wage?

Citation Type: Miscellaneous

Publication Year: 2021

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: The extensive literature on minimum wages has found evidence for compression of relative wages and mixed results for employment. This literature has been plagued by a number of problems. The median-minimum wage-ratio has been used as the independent variable. First, the median is endogenous. Second, the minimum wage policies are also endogenous. Third, it is difficult to disentangle (i) compression of relative wages and (ii) truncation due to disem-ployment effects. Fourth, compression combined with an upward sloped labour supply curve implies both negative demand effects for the least skilled workers and positive supply effects for higher types. We offer solutions for all four problems, by using instruments for the mean and the minimum, by using data on personal characteristics, and by a careful specification of the heterogeneity in employment effects. We apply our method to US data starting from 1979, allowing for wide variation in minimum wages.

Url: https://conference.iza.org/conference_files/transatlantic_2021/teulings_c1115.pdf

User Submitted?: No

Authors: Chen, Yujiang; Teulings, Coen

Publisher:

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

Countries: