Abstract-We use policy discontinuities at state borders to identify the effects of minimum wages on earnings and employment in restaurants and other low-wage sectors. Our approach generalizes the case study method by considering all local differences in minimum wage policies between 1990 and 2006. We compare all contiguous county-pairs in the United States that straddle a state border and find no adverse employment effects. We show that traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies. Our findings are robust to allowing for long-term effects of minimum wage changes.

Abstract-We use policy discontinuities at state borders to identify the effects of minimum wages on earnings and employment in restaurants and other low-wage sectors. Our approach generalizes the case study method by considering all local differences in minimum wage policies between 1990 and 2006. We compare all contiguous county-pairs in the United States that straddle a state border and find no adverse employment effects. We show that traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies. Our findings are robust to allowing for long-term effects of minimum wage changes.

We thank Lisa Bell, Carol Tomas and Jay Liao for excellent research assistance and Eric Freeman for helpful suggestions. We are grateful for generous support from the Ford Foundation. 2 ABSTRACTTraditional estimates of minimum wage effects include controls for state unemployment rates and state and year fixed-effects. Using CPS data on teens for the period 1990 -2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and vary with the source of identifying variation. Including controls for longterm growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out more negative long run effects. We do not find evidence of heterogeneous employment effects in different parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at indexation of the minimum wage in some states. 3 IntroductionThe employment level of teens has fallen precipitously in the 2000s, coinciding with the growth of state and federal minimum wages. But are the two causally related? Previous research on the effects of minimum wage policies on teen employment has produced conflicting findings. One set of results-statistically significant disemployment effects with employment elasticities in the "old consensus" range of -0.1 to -0.3-are associated with many studies that focus on teens, that use national-level household data (usually the Current Population Survey), and that include state and year fixed-effect controls to identify minimum wage effects. Another set of results-employment effects that are close to zero or even positive-are associated with studies that focus on low-wage sectors such as restaurants, that use employer-based data, and that use only local comparisons to identify minimum wage effects. 1The inconsistent findings may arise from differences in the groups being examined and/or differences in the datasets that are used. However, recent evidence suggests other possibilities (Dube, Lester and Reich, forthcoming). Unobserved spatial heterogeneities in employment trends can generate biases toward negative employment elasticities in national minimum wage studies as well as overstate the precision of local studies.In this paper, we seek to address and resolve the conflicting findings by using CPS data on teens over the 1990 to 2009 period and providing a detailed examination of heterogeneity and selectivity issues. More specifically, we consider whether the source of identifying variation in the minimum wage is coupled with sufficient controls for 1 Card and Krueger (2000); Neumark and Wascher (2007); Dube, Naidu and Reich (2007).4 counterfactual employment growth. With the addition of these controls we are able...

We provide the first estimates of the e ects of minimum wages on employment flows in the U.S. labor market, identifying the impact by using policy discontinuities at state borders. We find that minimum wages have a sizeable negative e ect on employment flows but not stocks. Separations and accessions fall among a ected workers, especially those with low tenure. We do not find changes in the duration of non-employment for separations or hires. This evidence is consistent with search models with endogenous separations, but explanations focused only on quits or only on layo s are unlikely to explain the full complement of findings.

This paper presents the first study of the economic effects of a citywide minimum wage—San Francisco's adoption of an indexed minimum wage, set at $8.50 in 2004 and $9.14 by 2007. Compared to earlier benchmark studies by Card and Krueger and by Neumark and Wascher, this study surveys table-service as well as fast-food restaurants, includes more control groups, and collects data for more outcomes. The authors find that the policy increased worker pay and compressed wage inequality, but did not create any detectable employment loss among affected restaurants. The authors also find smaller amounts of measurement error than characterized the earlier studies, and so they can reject previous negative employment estimates with greater confidence. Fast-food and table-service restaurants responded differently to the policy, with a small price increase and substantial increases in job tenure and in the proportion of full-time workers among fast-food restaurants, but not among table-service restaurants.