Effects of Minimum Wages on Youth Employment: the Importance of Accounting for Spatial Correlation |
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| Authors: | Charlene M Kalenkoski Donald J Lacombe |
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| Institution: | (1) Department of Economics, Ohio University, 351 Bentley Annex, Athens, OH 45701, USA;(2) Department of Economics, Ohio University, 345 Bentley Annex, Athens, OH 45701, USA |
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| Abstract: | The relationship between minimum wage increases and youth employment is investigated using county-level data and spatial econometric
techniques. Results that account for spatial correlation indicate that a 10% increase in the effective minimum wage is associated
with a 3.2% decrease in youth employment, a result that is 28% higher than the corresponding estimate that does not control
for spatial correlation. Thus, estimates that do not take into account spatial correlation may significantly underestimate
the negative effect of the minimum wage on teenage employment. Improperly controlling for factors that vary systematically
over space can lead to incorrect inferences and misinform policy.
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| Keywords: | Spatial econometrics Spatial autoregressive model Minimum wage Youth employment |
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