The Spending and Debt Response to Minimum Wage Hikes

Daniel Aaronson, Sumit Agarwal and Eric French

American Economic Review, 2012, vol. 102, issue 7, 3111-39

Abstract: Immediately following a minimum wage hike, household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with minimum wage workers. Most of the spending response is caused by a small number of households who purchase vehicles. Furthermore, we find that the high spending levels are financed through increases in collateralized debt. Our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock. (JEL D12, D14, D91, J38)

JEL-codes: D12 D14 D91 J38 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/aer.102.7.3111
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Citations: View citations in EconPapers (118)

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