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Minimum wages and housing rents: Theory and evidence

Atsushi Yamagishi

Regional Science and Urban Economics, 2021, vol. 87, issue C

Abstract: I analyze the effect of minimum wage hikes on housing rents using exogenous variation in minimum wages across local labor markets in Japan. I estimate that in low-quality rental housing market, a 10% minimum wage increase induces a 2.5%–4.5% increase in rents. Minimum wage hikes benefit workers in light of a spatial equilibrium model showing that changes in housing market rents work as a sufficient statistic for measuring utility changes arising from changes in minimum wages. The increase in housing rents also implies an unintended benefit for homeowners.

Keywords: Minimum wages; Housing rents; Capitalization; Spatial equilibrium; Price levels (search for similar items in EconPapers)
JEL-codes: H70 J38 J61 R23 R38 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:87:y:2021:i:c:s0166046221000090

DOI: 10.1016/j.regsciurbeco.2021.103649

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