Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties

Arindrajit Dube, T. William Lester and Michael Reich
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T. William Lester: Department of City and Regional Planning of UNCChapel Hill
Michael Reich: Department of Economics and IRLE, University of California, Berkeley

The Review of Economics and Statistics, 2010, vol. 92, issue 4, 945-964

Abstract: We use policy discontinuities at state borders to identify the effects of minimum wages on earnings and employment in restaurants and other low-wage sectors. Our approach generalizes the case study method by considering all local differences in minimum wage policies between 1990 and 2006. We compare all contiguous county pairs in the United States that straddle a state border and find no adverse employment effects. We show that traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies. Our findings are robust to allowing for long-term effects of minimum wage changes. (c) 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2010
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