Research Paper Number 2011-08
The authors employ spatial econometric techniques and Annual Averages data from the U.S. Bureau of Labor Statistics for 1990-2004 to examine how changes in the minimum wage affect teen employment. Spatial econometric techniques account for the fact that employment is correlated across states. Such correlation may exist if a change in the minimum wage in a state affects employment not only in its own state but also in other, neighboring states. The authors show that state minimum wages negatively affect teen employment to a larger degree than is found in studies that do not account for this correlation. Their results show a combined direct and indirect effect of minimum wages on teen employment to be -2.1% for a 10% increase in the real effective minimum wage. Ignoring spatial correlation underestimates the magnitude of the effect of minimum wages on teen employment.
Digital Commons Citation
Kalenkoski, Charlene M. and Lacombe, Donald J., "Minimum Wages and Teen Employment: A Spatial Panel Approach" (2011). Regional Research Institute Publications and Working Papers. 62.