[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/cam/camdae/1889.html
   My bibliography  Save this paper

Distribution Effects of Local Minimum Wage Hikes: A Spatial Job Search Approach

Author

Listed:
  • Zhang, W.
Abstract
This paper develops and estimates a spatial general equilibrium job search model to study the effects of local and universal (federal) minimum wage policies. In the model, firms post vacancies in multiple locations. Workers, who are heterogeneous in terms of location and education types, engage in random search and can migrate or commute in response to job offers. I estimate the model by combining multiple databases including the American Community Survey (ACS) and Quarterly Workforce Indicators (QWI). The estimated model is used to analyze how minimum wage policies affect employment, wages, job postings, vacancies, migration/ commuting, and welfare. Empirical results show that minimum wage increases in local county lead to an exit of low type (education

Suggested Citation

  • Zhang, W., 2018. "Distribution Effects of Local Minimum Wage Hikes: A Spatial Job Search Approach," Cambridge Working Papers in Economics 1889, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1889
    Note: wz301
    as

    Download full text from publisher

    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1889.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, January.
    2. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    3. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    4. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    5. Raven Molloy & Christopher L. Smith & Abigail Wozniak, 2011. "Internal Migration in the United States," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 173-196, Summer.
    6. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    7. Richard V. Burkhauser & Kenneth A. Couch & David C. Wittenburg, 2000. "Who Minimum Wage Increases Bite: An Analysis Using Monthly Data from the SIPP and the CPS," Southern Economic Journal, John Wiley & Sons, vol. 67(1), pages 16-40, July.
    8. David Neumark & JM Salas & William Wascher, 2014. "More on recent evidence on the effects of minimum wages in the United States," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-26, December.
    9. Joan Monras, 2019. "Minimum Wages and Spatial Equilibrium: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 37(3), pages 853-904.
    10. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    11. Alan Manning & Barbara Petrongolo, 2017. "How Local Are Labor Markets? Evidence from a Spatial Job Search Model," American Economic Review, American Economic Association, vol. 107(10), pages 2877-2907, October.
    12. Costas Meghir & Renata Narita & Jean-Marc Robin, 2015. "Wages and Informality in Developing Countries," American Economic Review, American Economic Association, vol. 105(4), pages 1509-1546, April.
    13. Altonji, Joseph G & Segal, Lewis M, 1996. "Small-Sample Bias in GMM Estimation of Covariance Structures," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 353-366, July.
    14. Isaac Sorkin, 2015. "Are There Long-Run Effects of the Minimum Wage?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 306-333, April.
    15. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8grh35j2 is not listed on IDEAS
    16. Daniela Del Boca & Christopher Flinn & Matthew Wiswall, 2014. "Household Choices and Child Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(1), pages 137-185.
    17. Enrico Moretti & Daniel J. Wilson, 2017. "The Effect of State Taxes on the Geographical Location of Top Earners: Evidence from Star Scientists," American Economic Review, American Economic Association, vol. 107(7), pages 1858-1903, July.
    18. repec:hal:spmain:info:hdl:2441/4ra95789n9nrr59b6lmini6tp is not listed on IDEAS
    19. Moretti, Enrico, 2011. "Local Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 14, pages 1237-1313, Elsevier.
    20. Edward L. Glaeser & Joshua D. Gottlieb, 2008. "The Economics of Place-Making Policies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 155-253.
    21. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
    22. Christopher Flinn & Ahu Gemici & Steven Laufer, 2017. "Search, Matching, and Training," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 260-297, April.
    23. Arindrajit Dube & Suresh Naidu & Michael Reich, 2007. "The Economic Effects of a Citywide Minimum Wage," ILR Review, Cornell University, ILR School, vol. 60(4), pages 522-543, July.
    24. Nathaniel Baum-Snow & Ronni Pavan, 2012. "Understanding the City Size Wage Gap," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(1), pages 88-127.
    25. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
    26. Ekaterina Jardim & Mark C. Long & Robert Plotnick & Emma van Inwegen & Jacob Vigdor & Hilary Wething, 2017. "Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle," NBER Working Papers 23532, National Bureau of Economic Research, Inc.
    27. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Post-Print hal-03458567, HAL.
    28. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, July.
    29. Greenwood, Michael J, 1975. "Research on Internal Migration in the United States: A Survey," Journal of Economic Literature, American Economic Association, vol. 13(2), pages 397-433, June.
    30. Schwartz, Aba, 1973. "Interpreting the Effect of Distance on Migration," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1153-1169, Sept.-Oct.
    31. John Horton, 2017. "Price Floors and Employer Preferences: Evidence from a Minimum Wage Experiment," CESifo Working Paper Series 6548, CESifo.
    32. Patrick Kline, 2010. "Place Based Policies, Heterogeneity, and Agglomeration," American Economic Review, American Economic Association, vol. 100(2), pages 383-387, May.
    33. Coen-Pirani, Daniele, 2010. "Understanding gross worker flows across U.S. states," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 769-784, October.
    34. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
    35. James Mabli & Christopher Flinn, 2007. "On-the-Job Search, Minimum Wages, and Labor Market Outcomes in an Equilibrium Bargaining Framework," 2007 Meeting Papers 791, Society for Economic Dynamics.
    36. Deere, Donald & Murphy, Kevin M & Welch, Finis, 1995. "Employment and the 1990-1991 Minimum-Wage Hike," American Economic Review, American Economic Association, vol. 85(2), pages 232-237, May.
    37. McKinnish, Terra, 2017. "Cross-state differences in the minimum wage and out-of-state commuting by low-wage workers," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 137-147.
    38. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms9850c12h1p is not listed on IDEAS
    39. Eckstein, Zvi & Wolpin, Kenneth I, 1990. "Estimating a Market Equilibrium Search Model from Panel Data on Individuals," Econometrica, Econometric Society, vol. 58(4), pages 783-808, July.
    40. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms985085gkbp is not listed on IDEAS
    41. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Winters, John, 2022. "Minimum Wages and Restaurant Employment for Teens and Adults in Metropolitan and Non-Metropolitan Areas," ISU General Staff Papers 202208161905110000, Iowa State University, Department of Economics.
    2. Perez Perez, Jorge, 2020. "City Minimum Wages and Spatial Equilibrium Effects," SocArXiv fpx9e, Center for Open Science.
    3. Micheli, Martin, 2019. "It is real: On the relation between minimum wages and labor market outcomes for teenagers," Ruhr Economic Papers 829, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    4. Dharmasankar, Sharada & Yoo, Hoyoung, 2023. "Assessing the main and spillover effects of Seattle's minimum wage on establishment decisions," Regional Science and Urban Economics, Elsevier, vol. 99(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Weilong Zhang, 2018. "Distributional Effects of Local Minimum Wage Hikes: A Spatial Job Search Approach," 2018 Meeting Papers 12, Society for Economic Dynamics.
    2. Petra E. Todd & Weilong Zhang, 2022. "Distributional Effects of Local Minimum Wages: A Spatial Job Search Approach," PIER Working Paper Archive 22-027, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Niklas Engbom & Christian Moser, 2022. "Earnings Inequality and the Minimum Wage: Evidence from Brazil," American Economic Review, American Economic Association, vol. 112(12), pages 3803-3847, December.
    4. Christopher Flinn & James Mabli & Joseph Mullins, 2017. "Firms' Choices of Wage-Setting Protocols in the Presence of Minimum Wages," Working Papers 2017-070, Human Capital and Economic Opportunity Working Group.
    5. Benoît Schmutz & Modibo Sidibé, 2019. "Frictional Labour Mobility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(4), pages 1779-1826.
    6. David Neumark & Peter Shirley, 2022. "Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 384-417, October.
    7. Christopher Flinn & Joseph Mullins, 2015. "Labor Market Search And Schooling Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(2), pages 359-398, May.
    8. Benoit Schmutz & Modibo Sidibé, 2014. "Job Search and Migration in a System of Cities," Working Papers 2014-43, Center for Research in Economics and Statistics.
    9. Marianna Kudlyak & Murat Tasci & Didem Tuzemen, 2019. "Minimum Wage Increases and Vacancies," Working Papers 19-30R, Federal Reserve Bank of Cleveland, revised 21 Apr 2022.
    10. Neumark David, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, De Gruyter, vol. 20(3), pages 293-329, August.
    11. Lavecchia, Adam M., 2020. "Minimum wage policy with optimal taxes and unemployment," Journal of Public Economics, Elsevier, vol. 190(C).
    12. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2008. "A quantitative evaluation of payroll tax subsidies for low-wage workers: An equilibrium search approach," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 817-843, April.
    13. Arindrajit Dube & Attila Lindner, 2024. "Minimum Wages in the 21st Century," RF Berlin - CReAM Discussion Paper Series 2524, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    14. Perez Perez, Jorge, 2020. "City Minimum Wages and Spatial Equilibrium Effects," SocArXiv fpx9e, Center for Open Science.
    15. Christine Braun, 2019. "Crime and the minimum wage," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 122-152, April.
    16. Christopher Flinn & Ahu Gemici & Steven Laufer, 2017. "Search, Matching, and Training," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 260-297, April.
    17. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," American Economic Review, American Economic Association, vol. 101(7), pages 2873-2898, December.
    18. repec:hal:journl:hal-01070442 is not listed on IDEAS
    19. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2016. "Matching, Sorting and Wages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 63-87, January.
    20. Launov, Andrey & Wälde, Klaus, 2016. "The employment effect of reforming a public employment agency," European Economic Review, Elsevier, vol. 84(C), pages 140-164.
    21. Clemens, Jeffrey & Wither, Michael, 2019. "The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers," Journal of Public Economics, Elsevier, vol. 170(C), pages 53-67.

    More about this item

    Keywords

    spatial equilibrium; local minimum wage policy; labor relocation;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cam:camdae:1889. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jake Dyer (email available below). General contact details of provider: https://www.econ.cam.ac.uk/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.