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Puerto Rico's minimum wage: Revisiting a price floor with bite

Omberg Robert Tucker
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Omberg Robert Tucker: George Mason University, Department of Economics, 4400 University Dr.FairfaxVA22030

IZA Journal of Labor Policy, 2021, vol. 11, issue 1, 25

Abstract: Revisiting research from the 1990s from Castillo-Freeman and Krueger, I use the synthetic control method of Abadie et al. to estimate the impact of the most recent increase in the federal minimum wage on employment in Puerto Rico. I estimate that the employment/population ratio of various groups in Puerto Rico was significantly lower than that of a data-constructed synthetic Puerto Rico which did not raise its minimum wage. Placebo tests on other donor units, time periods, and population groups suggest that a significant portion of this gap is a result of the minimum wage. Groups with greater exposure to the minimum wage, such as teens and restaurant workers, experienced proportionally greater declines in employment. My results suggest an own-wage elasticity of employment in Puerto Rico of −0.68, higher than estimates from the mainland, which suggests that the employment response to minimum wages may be more dramatic at higher relative minimum wages.

Keywords: Minimum Wage; Puerto Rico; Synthetic Controls (search for similar items in EconPapers)
JEL-codes: J01 J08 J40 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.2478/izajolp-2021-0009

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