Volume 37, Number 1 (Winter) 2002
Neumark, David, and William Wascher. 2002. "State-Level Estimates of Minimum Wage Effects: New Evidence and Interpretations from Disequilibrium Methods." Journal of Human Resources 37(1):35-62.
Research using state-level data to estimate minimum wage effects on employment follows the textbook treatment of minimum wages, assuming that minimum wages are binding and that labor markets are competitive. We present an alternative method of estimating minimum wage effects using similar data that relaxes these assumptions, using a disequilibrium approach. Applying this approach to the data and sample period used in many earlier state-level studies suggests that simple state-level reduced-form estimates of minimum wage effects on employment depend on the sample used, and may badly understate the disemployment effects of a binding minimum wage.
David Neumark is a professor of economics at Michigan State University. and a research associate of the NBER. William Wascher is Assistant Director and Macroeconomic Analysis Chief of the Section at the Board of Governors of the Federal Reserve System. The views in this paper do not necessarily represent those of the Federal Reserve Board or its staff The authors thank David Card. Frank Diebold. Chris Hanes. Jeff Wooldridge, an anonymous referee, and seminar participants at the NBER Summer Institute. Penn State, Michigan State. Johns Hopkins. Maryland, CUNY, and the BLS for helpful comments. An earlier version of this paper circulated as NBER Working Paper No. 4617. The data used in this article can be obtained beginning May 2002 through April 2005 from David Neumark. Department of Economics, Michigan State University, East Lansing, MI. 48824.
© 2003 by the Board of Regents of the University of Wisconsin System
US ISSN 0022-166X