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The heterogeneous effects of the minimum wage on employment across States

The heterogeneous effects of the minimum wage on employment across States
The heterogeneous effects of the minimum wage on employment across States
This paper studies the relationship between the minimum wage and the employment rate in the US using the framework of a panel structure model. The approach allows the minimum wage, along with some other controls, to have heterogeneous effects on employment across states which are classified into a group structure. The effects on employment are the same within each group but differ across different groups. The number of groups and the group membership of each state are both unknown a priori. The approach employs the C-Lasso technique, a recently developed classification method that consistently estimates group structure and leads to oracle-efficient estimation of the coefficients. Empirical application of C-Lasso to a US restaurant industry panel over the period 1990 - 2006 leads to the identification of four separate groups at the state level. The findings reveal substantial heterogeneity in the impact of the minimum wage on employment across groups, with both positive and negative effects and geographical patterns manifesting in the data. The results provide some new perspectives on the prolonged debate on the impact of minimum wage on employment.
0165-1765
179-185
Phillips, Peter Charles B
f67573a4-fc30-484c-ad74-4bbc797d7243
Wang, Wuyi
a019ec63-a343-494f-8494-83b7577da45f
Su, Liangjun
9594d645-a8c4-47d7-814e-77f40e3c4317
Phillips, Peter Charles B
f67573a4-fc30-484c-ad74-4bbc797d7243
Wang, Wuyi
a019ec63-a343-494f-8494-83b7577da45f
Su, Liangjun
9594d645-a8c4-47d7-814e-77f40e3c4317

Phillips, Peter Charles B, Wang, Wuyi and Su, Liangjun (2019) The heterogeneous effects of the minimum wage on employment across States. Economics Letters, 179-185. (doi:10.1016/j.econlet.2018.11.002).

Record type: Article

Abstract

This paper studies the relationship between the minimum wage and the employment rate in the US using the framework of a panel structure model. The approach allows the minimum wage, along with some other controls, to have heterogeneous effects on employment across states which are classified into a group structure. The effects on employment are the same within each group but differ across different groups. The number of groups and the group membership of each state are both unknown a priori. The approach employs the C-Lasso technique, a recently developed classification method that consistently estimates group structure and leads to oracle-efficient estimation of the coefficients. Empirical application of C-Lasso to a US restaurant industry panel over the period 1990 - 2006 leads to the identification of four separate groups at the state level. The findings reveal substantial heterogeneity in the impact of the minimum wage on employment across groups, with both positive and negative effects and geographical patterns manifesting in the data. The results provide some new perspectives on the prolonged debate on the impact of minimum wage on employment.

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More information

Accepted/In Press date: 3 November 2018
e-pub ahead of print date: 29 November 2018
Published date: January 2019

Identifiers

Local EPrints ID: 425898
URI: https://eprints.soton.ac.uk/id/eprint/425898
ISSN: 0165-1765
PURE UUID: 89cc9978-028b-41fb-af87-5121125a8709
ORCID for Peter Charles B Phillips: ORCID iD orcid.org/0000-0003-2341-0451

Catalogue record

Date deposited: 06 Nov 2018 17:30
Last modified: 20 Jul 2019 00:47

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