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Title: Minimum Wages and Spatial Equilibrium: Theory and Evidence

Citation Type: Miscellaneous

Publication Year: 2015

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Abstract: Often times minimum wage laws are decided at the state or regional level. Others, federal level increases are only binding in certain states. This has been used in previous literature to evaluate the effects of minimum wages on earnings and employment levels. This paper introduces a spatial equilibrium model to think about the seemingly conflicting findings in this previous literature. It shows that the introduction of minimum wages can lead to an increase or a decrease in population depending on the local labor demand elasticity and on how are unemployment benefits financed. The paper provides empirical evidence consistent with the model. On average, increases in minimum wages lead to increases in average wages, decreases in employment and net out-migration of low-skilled workers. The implied local labor demand elasticity is estimated to be between -.4 and -.7.

Url: http://www.columbia.edu/~jm3364/Minimum_Wage_and_Space.pdf

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Authors: Monras, Joan

Publisher: Sciences Po

Data Collections: IPUMS CPS

Topics: Other

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